CBN develops strategy to reduce inflation
In keeping with its tough approach to containing the nation’s surging inflation, the Central Bank of Nigeria (CBN) has said that it will be slowing down both its numerous interventions in the real sector as well as its loans to the federal government through various means.
Out of the N9.3 trillion it distributed as intervention funds to the various sectors of the economy, only N3.7 trillion has been reimbursed, according to what it said, and there are still N5 trillion in unpaid debts that are not yet due.
Several departmental directors of the CBN told journalists during a post-Monetary Policy Committee meeting media parley yesterday that the aggressive monetary policy is in keeping with global trends and is intended to decrease inflation, which peaked at 20.5% in August this year.
Following its 287th meeting in Abuja on Tuesday, the MPC members opted to reduce the money supply by hiking the benchmark interest rate by 150 basis points, to 15% from 14%, and the Cash Reserve Requirement (CRR), by 5%, from 27.5 to 32.5 percent.
Godwin Emefiele, the governor of the Central Bank of Nigeria, claimed that this was done in an effort to “draw liquidity out of the bank vaults” in advance of electioneering activities and to stop market speculation.
Other measures are also being implemented to mop up liquidity from the Nigerian economy, the CBN’s director of monetary policy, Hassan Mahmud, said as an additional explanation of the action.
“Electioneering is another genuine reason for also mopping up now, because when those funds come in with the ones that we are having on ground, then you start seeing too much money within the system that is not going out,” he stressed.
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