CBN Plans Monetary Policy Adjustment Amidst Inflation Target Achievement

In anticipation of its first Monetary Policy Committee (MPC) meeting scheduled for the coming month, the Central Bank of Nigeria (CBN) has articulated plans to adjust monetary policy once it attains its 2024 inflation target of 21.4%. The objective is to subsequently reduce interest rates, fostering an environment conducive to economic growth.

The announcement was made by CBN’s Deputy Governor, Economic Policy, Muhammad S. Abdullahi, during a discussion in Lagos. Abdullahi conveyed that the implementation of both monetary and fiscal policies would alleviate foreign exchange constraints in the foreseeable future.

Contrastingly, Dr. ‘Biodun Adedipe, Chief Consultant of B. Adedipe Associates Ltd, emphasized the current scenario in Nigeria, where high inflation rates and low interest rates have resulted in a negative real interest rate, discouraging investment. Adedipe suggested that the MPC should consider raising the Monetary Policy Rate (MPR) to elevate the real interest rate and stimulate investment.

Abdullahi, while representing the CBN deputy governor, highlighted that inflationary pressures were expected to persist in the short term but projected a decline to 21.4% in 2024. The CBN plans to adjust its policy rate in response to inflation trends, with a potential shift towards a more accommodative monetary policy if inflationary pressures decrease.

The discussion also touched upon the African-Atlantic Gas Pipeline Nigeria-Morocco project, a key focus for regional integration and economic development. Abdullahi expressed optimism that the implementation of government reforms would ease inflation, leading to enhanced consumer confidence, purchasing power, and overall business benefits.

Additionally, the CBN’s adoption of an inflation-targeting framework was discussed, with an emphasis on using monetary policy tools to achieve a specific inflation rate within a targeted range. Clear communication of this target was deemed vital for shaping expectations, influencing investment decisions, and guiding economic planning.

Addressing the exchange rate regime, Abdullahi underscored the CBN’s pursuit of a flexible exchange rate regime and the unification of the foreign exchange market into a single window. The recent exchange rate reform aimed to eliminate distortions and uncertainties, promoting transparency and reducing arbitrage opportunities.

The discussion also highlighted the significance of increased allocations to the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) in the 2024 budget, signaling the government’s commitment to fostering growth in the business sector.

Previous post King Mohammed VI Invites Nigerian President Tinubu to Morocco, Focus on Bilateral Relations and Gas Pipeline Project
Next post Nigeria Explores Collaboration with Magnus Aircraft Group for Aircraft Manufacturing Capacity

Leave a Reply

Your email address will not be published. Required fields are marked *