The Federal Government has been advised to reduce its recourse to the Central Bank of Nigeria’s (CBN) finance, in order to contain inflation.
Niyi Yusuf, board chairman, Nigerian Economic Summit Group (NESG), gave the advice in his keynote presentation at the annual Vanguard Economic Discourse 2023 tagged, “Taming inflation and stimulating growth: The place of fiscal & monetary policies”.
According to him, the CBN deficit financing of the government through the Ways and Means rose to N23.8 trillion in October 2022 from N17.5 trillion in December 2021.
He was concerned that rising inflation has led to low growth in critical sectors of the economy, and has caused a further decline in purchasing power.
Purchasing power of the naira has fallen by 14.9 percent. For example, N1,000 in January 2022 had fallen to N851 by the end of the year, he said.
According to him, over the last eight years, statistics have shown that while the Federal Government operated an expansionary fiscal policy, the monetary policy has oscillated between contractionary and expansionary stances.
“This divergence between fiscal and monetary policies will make taming inflation and sustaining growth in Nigeria a wild goose chase,” he said.
To rein in inflationary pressure, the CBN has increased the Monetary Policy Rate (MPR) five consecutive times from 11.5 percent in May 2022 to 17.5 percent in January 24, 2023. Similarly, the Cash Reserve Ratio (CRR) was raised by 250 basis points to 32.5 percent in 2022.
On the way forward, Yusuf said the government should remove petroleum subsidy while establishing a compact which protects the poor and vulnerable from its effect.
He stressed the need to increase government expenditure efficiency and transparency while reviewing all forms of untargeted subsidies, tax waivers and incentives, and increase non-oil revenues through Tax Net Expansion and Collection Efficiency, among others.
Read also: Inflation, two others top global CEO’s fears for 2023
Ibukun Awosika, former chairman of First Bank of Nigeria, said Nigeria could be better if the media upholds its fundamental social responsibility in the country.
“We have to live up to our responsibilities in upholding sanity in our socio-economic and political and leadership systems.
She called on the Nigerian government to address the loopholes in the economy to prevent the Japa syndrome from threatening the country.
Toyin Sanni, group chief executive, Emerging Africa Capital Limited, said high inflation in Nigeria has had a negative impact on the country’s economic growth.
According to her, there are several fiscal policy measures that Nigeria can use to remedy the negative impacts of high inflation on economic growth.
The measures include, reducing government spending, increasing taxes, improving infrastructure, increasing exports, lowering the money supply, reducing corruption and increasing transparency, among others.
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