Despite the economy’s prospects, the Central Bank of Nigeria (CBN) has advised Nigerians to hold onto optimism because predictions from three fiscal and monetary agencies indicated that the economy will recover before or by the end of the year.
The Central Bank of Nigeria (CBN), the Federal Government of Nigeria (FGN), and the International Monetary Fund (IMF) have all guaranteed that the economy will grow by 3.52 percent (CBN), 4.20 percent (FGN), and 3.40 percent (CBN), respectively, according to the apex bank’s communiqué at the conclusion of the Monetary Policy Committee (MPC) meeting last week in Abuja (IMF).
The communiqué states:
Members noted that though the global economy was progressively weakening due to the various headwinds confronting the recovery, in Nigeria, output growth has been sustained as a result of the combination of development finance interventions by the Bank and fiscal stimulus by the Federal Government. Members noted that in the last three years, the CBN has injected over N9 trillion into the economy, in addition to offering two- year moratorium for 10-year long-term loan facilities. The committee believes that these interventions have significantly helped engender growth. However, in light of the persisting pressures on inflation, the committee encouraged the Bank to maintain a close watch on the inflationary implications of the interventions. The MPC was concerned that within a four-month period, inflation had accelerated aggressively by 280 basis point from 17.71% in May 2022 to 20.52% in August 2022. The Committee was thus, of the view that given the primacy of its price and monetary stability mandate, it was expedient that significant focus must be given to taming inflation.
The Committee was therefore of the view that a hold or loosen option was not in consideration at this meeting. This is also because a loosening will further widen the negative real interest rate gap and worsen the financial market conditions, as savings mobilization and investment inflows would decline further. It was also of the view that with the aggressive policy normalization in Advance economies, loosening the stance of policy would result in a sharp depreciation of exchange rate, leading to further hike in capital outflows.
Regarding a hold decision, this would entail a continued decline in real earnings for those on fixed incomes as well as the standard of living for households with middle- and low-income members.
