The Governor of the Central Bank of Nigeria Yemi Cardoso, has stated that sustained inflation could lengthen the duration of monetary tightening measures and impede the country’s capacity for growth.
He said this at the foreword inaugural edition of the CBN’s Macroeconomic Outlook for Nigeria, recently released by the apex bank, according Nairametric.
Based on this foreword, the governor of the central bank suggests that if inflation keeps rising, the apex bank may stick to its hawkish monetary policy, which is supported by higher interest rates.
This outlook forewords comes following the National Bureau of Statistics CPI data recently published, which shows that the inflation rate increased somewhat in June and increased month over month for the first time since February 2024.
Additionally, Cardoso listed several threats to Nigeria’s optimistic domestic outlook. He pointed out that supply-side shocks, global geoeconomic fragmentation, and security issues might all make inflationary pressures worse.
These factors, coupled with long-standing structural imbalances, could necessitate extended monetary tightening, thereby depressing growth potential.
He said “The positive domestic outlook is, however, subject to certain risks, especially, as security challenges, supply-side shocks, and global geoeconomic fragmentation could aggravate inflationary pressures.
“Elevated inflation, due to long-standing structural imbalances, could extend monetary tightening and depress growth potentials.
“Oil theft, pipeline vandalism, and an unlikely decline in crude oil price could also constrain fiscal space, hamper foreign exchange receipts, lower accretion to the external reserves, heighten pressure in the foreign exchange market and undermine domestic stability.”
According to the CBN governor, despite current obstacles, Nigeria’s economy is projected to grow at a steady pace, with inflation predicted to moderate and exchange rates to remain more stable.
He noted that improvements in domestic production and refining capacity of crude oil, along with anticipated rises in crude oil prices, are expected to boost growth from 2.74% in 2023 to 3.38% in 2024.
Although inflation is still high, it is expected to decline from 28.92% in December 2023 to 21.40% within a range of 19.84 to 25.35%. This is because expectations will be effectively anchored by the shift to an inflation-targeting light framework and strict monetary policy.
Cardoso added that tight liquidity conditions are anticipated to persist, with an upward move in the yield curve drawing in capital inflows.
Cardoso emphasized the need to maintain measures to fortify the foreign exchange market, intensify monetary tightening to reduce inflation risks, and address security concerns surrounding the food belt and oil installations in order to address prospective threats and existing imbalances.
In addition, he called for increased and effective coordination among all government policy organs to foster policy harmonization and ensure robust synchronization of socio-economic measures.
This he claimed would support economic governance under a common vision and support domestic development.
In June 2024, NBS released the latest Consumer Price Index (CPI) data. It showed that Nigeria’s headline inflation rate increased month over month for the first time since February 2024.
