The Central Bank of Nigeria (CBN) has been urged to increase interest rates for banks to contain the soaring inflation in the country.
The advice was contained in a policy memo by the Agora Policy, stating that past unconventional policies of the erstwhile CBN governor were partly responsible for the high inflation the country is battling with.
The report stated that special interventions embarked on by the CBN and the availability of money to the federal government worsened the inflation figure.
“The recent history of monetary policy in Nigeria can be described simply as the CBN trying to use monetary policy for things that monetary policy could not do, and choosing to focus on other issues while abandoning its inflation mandate.
“As expected, the outcome from not choosing lower inflation has been higher inflation without any real impact on the many other things it tried to do because, you know, money is neutral.”
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The report said the CBN abandoning convention for the unconventional is making people doubt its ability to control inflation.
It, however, said to bring the situation under control, the bank needs to recognise the scale of the inflation challenge and the importance of getting inflation under control.
“As long as inflation remains high, every other objective, be it the quest for exchange rate stability or the president’s agenda for increased cheap lending to MSMEs, will be much more difficult to achieve. The CBN needs to remember that its primary monetary policy objective is to keep inflation in check.”