According to the Manufacturers Association of Nigeria (MAN), among other things, low currency availability and rising production costs are the main causes of inflation in the nation. High import costs are also a result of the Naira’s devaluation.
According to Mr. Segun Ajayi-Kadir, Director General of MAN, revamping the naira and dealing in the currency outside banks (CoB) may not have the impact on inflation that the Central Bank of Nigeria had hoped for (CBN).
He pointed out that the National Bureau of Statistics (NBS) blamed the spike in headline inflation in January on disruptions in the supply of food items, higher import costs as a result of the Naira’s devaluation, and a prevalent
His words: “This is contrary to the expectation of CBN that the currency redesign will help to tame inflation by bringing the hoarded currency into the banking system and giving CBN the chance to establish effective management of the monetary policy. It is now evident that redesigning the currency and sucking in the currency outside the banking system may not have any significant effect on inflation.
Inflation: Central Bank Of Nigeria Raises Interest Rates To 15.5%
“You have a situation where the physical cash in circulation is only about 6.8 per cent of the total monies in the national economy. This means that the volume of money in the form of instruments such as deposits and bonds, for instance, far exceeds physical money. Additionally, we have, for more than two decades ago, had about 85 percent of our money in circulation outside the banks.
“What actually drives inflation has more to do with production and a number of other familiar challenges. In particular, you can easily see the hand of heightened insecurity which has hindered food production and hence food inflation. Another is the high importation and paucity of forex.
“There is therefore the need to address the real issues that fuel inflation by prioritizing the allocation of forex to the manufacturing sector, expand and deepen special funding windows for the real sector and decisively addressing the issue of insecurity so that we can curb food inflation.
“The currency redesign, amongst other objectives of CBN, is aimed at checking inflation that has assumed a worrisome dimension in recent times. The CBN report that indicated that 70% of CoB has been sucked in should be a commendable feat in the cashless policy of the apex bank. It is however a different scenario that is playing out with regards to inflation.
“It may well be that these are early days in the assessment timeframe and we may have to tarry a while to fully appreciate the full implications or outcomes of the policy. This is more so that the currency transition has become enmeshed in tardy implementation and occasioned needless disruption of businesses and everyday life of the people. Already we are seeing a dip of more than 25 per cent in sales for locally manufactured products.”
Follow us on facebook
Post Disclaimer
The opinions, beliefs and viewpoints expressed by the author and forum participants on this website do not necessarily reflect the opinions, beliefs and viewpoints of Anaedo Online or official policies of the Anaedo Online.