The Central Bank of Nigeria’s monetary policy has come under fire from the International Monetary Fund, which claims it has not been successful in containing rising inflation.
It suggested that the federal government tighten up its fiscal policy by making investments in crucial industries that can steer the economy in a more positive direction over the long term.
The IMF urged the Central Bank of Nigeria to soft-pedal on increasing the monetary policy rate in a report titled “How Fiscal Restraint Can Help Fight Inflation’.
According to the IMF, “While monetary policy has the tools to subdue inflation, fiscal policy can put the economy on a sounder long-term footing through investment in infrastructure, health care, and education; fair distribution of incomes and opportunities through an equitable tax and transfer system; and provision of basic public services.
“The overall fiscal balance, however, affects demand for goods and services, and inflationary pressures.
“A smaller deficit cools aggregate demand and inflation, so the central bank doesn’t need to raise rates as much.
“Moreover, with global financial conditions constraining budgets, and public debt ratios above pre-pandemic levels, reducing deficits also addresses debt vulnerabilities.”
The IMF further cautioned that “fiscal stimulus in the current environment of high inflation would force central banks to slam on the brakes harder to curb inflation. This could put the financial system at risk given the high levels of debt in both the public and private sectors.
According to a recent report from the Nigerian Bureau of Statistics, headline inflation increased from 20.77% in September to 21.09%.
With a 0.21% decrease from one month to the next, food inflation continued to rise, accelerating to 23.72%. Similar to overall inflation, core inflation skyrocketed to 17.76% in October.
Investors King had also previously reported that the Nigeria National Petroleum Commission (NNPC) had released daily fuel consumption figures for Nigeria that were questioned by the International Monetary Fund (IMF). The multilateral financial institution also demanded that the Nigeria National Petroleum Company be thoroughly audited.