Bismarck Rewane, the managing director, Financial Derivatives Company Limited, has charged the Central Bank of Nigeria (CBN), to take advantage of the offshore measure in addressing the scourge of inflation in the country.
With 31.7 per cent inflation rate in February, analysts sought Central Bank of Nigeria’s (CBN) consideration of measures undertaken in three countries with significant inflation surge like Nigeria.
In an emailed report to investors, Rewane, said Kenya, with $74 billion economy, recorded 5.7 per cent inflation rate in March, after pursuing tight monetary policy, getting International Monetary Fund (IMF) assistance, carrying out structural reforms that included upward review of fuel prices.
Turkey with $907 billion economy, also tightened its monetary policy, sold Eurobonds, did wage review and achieved 68.5 per cent inflation rate in March.
In Egypt, inflation in February surged to 36 per cent from 29.8 per cent in January, underpinned by 50 per cent hike in minimum wage and 800 basis point hike in interest rate in one month.
The Financial Derivatives Company Limited said although there are no quick fixes, inflation can be managed as seen in Kenya, Turkey, and Egypt.
Rewane explained that not only tight monetary policy was used in these counties to fight inflation, new money was sourced, institutional intervention was undertaken from multilateral financial institutions, structural reforms and increase in productivity were also entrenched.
He insisted that for Nigeria, the rate hike from 600 basis points in two months to 24.75 per cent alone could not address the inflation surge.
“Rate hike alone may not be a golden bullet that will address inflation. However, new money and intervention from institutions are needed as a backup for a quicker outcome,” he predicted.
He said money supply grew by 79 per cent to N95.6 trillion in February adding that there is a direct relationship between money supply and inflation. “Money supply is projected to decline in the next quarter underpinned by the CBN’s proactive approach to tightening the Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR),” he said.
He said the CBN-led Monetary Policy Committee (MPC) position that it will consistently raise interest rates until inflation numbers begin to rebound.
Bismarck Rewane added:
“Inflation does not disappear overnight. It takes focused commitment to rein in inflation. It took the US four months to record the first moderation in inflation. If the exchange rate continues to appreciate, and other measures are employed, inflation numbers are likely going to decline by June.”
According to him, Nigeria attracted capital inflows of about $2.3 billion in February which were underpinned by increased demand for Nigeria’s securities by foreign investors.
“CBN data also showed overseas remittances more than quadrupled to $1.3 billion in February compared with $300 million in January. CBN efforts to increase forex liquidity include restricting banks’ foreign exchange speculative activities, prohibiting street trading in foreign exchange and capping net open positions at 20 per cent of shareholders’ funds,” he said.
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