The Centre for the Promotion of Public Enterprise (CPPE) has called on the Central Bank of Nigeria (CBN) to slow down on monetary policy tightening ahead of its Monetary Policy Committee (MPC) meeting this month, stating that businesses are yet to recover from the hawkish monetary policy stance in the last two months.
The Centre stated this in its reaction to the latest inflation figures published by the NBS where headline inflation rose to 33.69% in April from 33.20% in March.
According to the statement signed by the Director-General of the CPPE, Dr Muda Yusuf, monetary policy tools should be paused for the fiscal side of the economy to work towards addressing the supply issues affecting the inflation dynamics in the country.
He stated, “Meanwhile we urge the monetary policy Committee to soften its monetary tightening stance for the time being. Businesses are yet to recover from the shocks of the recent bullish rate hikes.
The monetary instruments should be put on pause while fiscal policy tools address supply-side factors in the inflation dynamics.”
Furthermore, the Centre appreciated the slowdown in inflation for the month, especially headline and food inflation, but noted that the main drivers of price hikes (food, transport, insecurity in farming communities and other structural problems) are yet to cool down.
He explained that the drivers of inflation are supply-based and being addressed by the fiscal authorities.
Also, Dr. Yusuf doubled down on his call to the Nigerian Customs Service (NCS) to set a quarterly exchange rate between N800 and N1000 for import duties assessment, noting that the continuous fluctuation has a pass-through effect on inflation.
In his words, “Meanwhile the exchange rate benchmark for the computation of import duty continues to be a major concern to businesses as it has become a major inflation driver. We again urge the CBN to peg the rate at between N800 -N1000/dollar to be reviewed quarterly. This is necessary to reduce the pass-through effect of heightening trade costs on inflation.”
Meanwhile, the CPPE also lauded the commencement of refining by the Dangote refinery, stating that it would help slow down inflation in the short term.
Nigeria’s inflation rate rose to 33.69% in April on the back of an increase in food and transport prices. The rate is one of the highest in about 28 years.
The CBN, in an effort to rein in inflation, has increased interest rates by 600 basis points from 18.75% to 24.75% in the last two MPC meetings in February and March.
According to its MPC calendar, the apex bank will hold its next MPC meeting on the 20th of May, 2024 where it will decide to hold, raise or reduce MPR and other monetary policy tools.
Also, the NCS has continued to juggle the exchange rate for import duties according to the frequent swings in the foreign exchange market which the business community have consistently lamented about. The CPPE had previously advised the Customs Service to adopt a quarterly exchange rate for calculating import duties.
