The Central Bank of Nigeria (CBN), which continues to stand by its previous position of withdrawing direct development funding, has pledged to retrieve all of the over N10 trillion in intervention loans it has issued to various economic sectors.
In announcing the results of the two-day meeting of the Monetary Policy Committee (MPC), which saw an increase in the monetary policy rate (MPR) by 400 basis points to 22.75 percent, CBN governor Olayemi Cardoso reaffirmed the position of the top bank on Tuesday.
The committee increased the cash reserve ratio from 32.5 percent to 45 percent while keeping the liquidity ratio at 30 percent. It also rearranged the symmetric corridor surrounding the MPR to be +100/-700 basis points from +100/-300 basis points.
According to Cardoso, the committee’s members were more worried about the ongoing pressures on inflation and exchange rates than they were about pursuing growth, which would inevitably be impeded by the former if it were not addressed.
“Members expressed concern regarding the ongoing increase in inflation and underscored the committee’s resolve to buck the trend, given the risk-reward balance favoring rising inflation,” the speaker added.
“The committee was convinced that an enduring output expansion is only possible in an environment of low and stable inflation, even though it acknowledged the trade-off between the pursuit of output growth and taming inflation.”
According to a recent National Bureau of Statistics data, headline inflation increased from 28.92 percent in December 2023 to a new record high of 29.90 percent in January.
According to Cardoso, the main causes of inflationary pressure were significant fiscal deficits, exchange rate pass-through, growing energy costs, and persistent security issues in important food-producing regions. He claims that there are still major global risks to the forecast for domestic inflation, including tight financial conditions and trade disruptions brought on by continued geopolitical tensions.
“Therefore, staff projections suggest that inflation will continue to rise in the near future before declining,” he stated.
Beyond these variables, he claimed, the CBN’s trillions of naira in intervention expenditures had created other systemic distortions and contributed just as much to the current, elevated inflationary pressures in the economy.
Cardoso also restated his previous assertion that the naira is currently devalued and attributed it to what he called distortions without offering an explanation. Nevertheless, he said that the matter was being thoroughly probed and that those responsible would face consequences.
