Tinubu rejects CBN’s method of tackling inflation

The All Progressives Congress (APC) Presidential candidate, Asiwaju Bola Ahmed Tinubu, has said raising interest rates is not the solution to rising inflation.

Daily Trust reports that the Central Bank of Nigeria (CBN) has raised the interest rate to arrest the sharp rise in inflation which rose in August to 20.52 per cent from 19.64 per cent in the previous month, the highest in 17 years.

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Nigeria’s apex bank  has raised interest rates three times in 2022. It first raised the rates to 13 per cent in May, 14 percent in July and 15.5 percent in October, the highest ever since 2006.

But in his manifesto tagged, “Renewed Hope”, Tinubu said the current increasing inflationary trend was caused essentially by global supply disruptions, saying addressing it is not be increasing the interest rates.

“To impose the usual anti-inflation medicine of higher interest rates and tighter money-supply will only weaken the patient,” Tinubu said.

“The current surge of inflation is essentially driven by global supply and production disruptions beyond the control of any one government, including Nigeria’s. This is supply-driven inflation, not inflation caused by excess demand in an overheated economy.

“To impose the usual anti-inflation medicine of higher interest rates and tighter money-supply will only weaken the patient. The answer to supply-driven inflation is not to suppress normal aggregate demand levels.

“The better solution is to find ways to increase production and supply. To suppress demand will result in the overall loss of economic activity and jobs. Worse, since the inflation is grounded in supply side issues, placing this weight on the demand side will do little to answer the root causes of current inflation. In short, we punish the national economy and the people without deriving any meaningful benefit.”

Tinubu further stated that the  efficiency  of  monetary  policy  in driving  overall  economic  goals  is  limited, adding that Fiscal  policy  has numerous  channels  and transmission  mechanisms  by  which  it  can affect  the  economy.

“Unlike  monetary policy,  fiscal  policy  can  be  channelled directly  and  even  exclusively  toward  the poorer  segments  of  society.

“Monetary policy  transmission  mechanisms  are largely  limited  to  banks  and  other financial  institutions.  By  itself,  good  and wise  monetary  policy  is  insufficient  to produce  the  level  of  growth  we  seek. However,  bad  monetary  policy  is  sufficient in  itself  to  sink  the  best  of  our  economic dreams. Monetary  policy  must  focus  on  the exchange  rate,  interest  rate  and  price levels.  This  trio  must  serve  the  objective  of fiscal  policy,  which  is  broadly  shared prosperity.”