adplus-dvertising
Business News

Is Nigeria’s central bank confused?

Firstly, the current rate hike is very unlikely to tame inflation considering the limited impact interest rates have on taming inflation. In Nigeria, inflation is more of a supply issue than demand so interest rates have little or no impact on its fluctuation. This is clearly about Nigeria’s exchange rate situation which the bank has now recognized as a major factor that it has lost control of.

The apex bank has perhaps come full circle after recognizing the impact leaving rates stable will have on Nigeria’s ability to attract foreign demand for its bonds. Nigeria’s 5-year Eurobond yields crossed 11% last week almost double its yield at issue, suggesting the market was already pricing in hyperinflation. The exchange rate at the parallel market also depreciated to N610/$1 reflecting the impact of scarcity of forex in the market. These twin factors clearly showed the apex bank’s policies were inadequate and out of touch considering the reality of the situation.

This latest flip-flop highlights some of the criticisms often labelled against the central bank and its monetary policies. The core objective of a central bank is price stability and full employment, two main mandates that we have failed to achieve over the years.

WATCH NOW

DOWNLOAD NOW

Leave a Reply

Your email address will not be published.

Back to top button