The Nigerian Centre for the Promotion of Private Enterprise (CPPE) has revealed that the Central Bank of Nigeria’s financing of the country’s fiscal deficit is responsible for rising inflation.
CEO of CPPE, Dr. Muda Yusuf, in a statement said the CBN financing of fiscal deficit has been elevated to disturbing levels with huge implications for money supply growth and the consequent effect on inflation. It is an inflation tax.
Yusuf’s comments came just shortly after the National Bureau of Statistics (NBS) announced that Nigeria’s inflation rate had jumped by 20.77 per cent year-on-year in September 2022.
“Elevated inflationary pressures weaken the purchasing power of citizens as real incomes are eroded, increases poverty incidence, aggravates pressure on production costs, negatively impacts profitability, erodes shareholders value and undermines investors’ confidence.”
Dr. Yusuf further noted that Nigerian manufacturers are feeling the pains of inflation. He said that “in most cases, increases in production costs cannot be transferred to consumers. The implication is that manufacturers are also taking a hit. This is more pronounced where the demand for the product is elastic.”
“The CBN also needs to adopt a flexible exchange rate policy to address the problem of acute forex scarcity in the economy,” Yusuf added.
Meanwhile, the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, has blamed CBN for the huge gap in the Naira/dollar exchange rate at the official and black markets.
He said before the CBN banned sales of forex to the BDC operators in July 2021, the exchange rate for dollars in the black market was N501/$1. However, since the embargo, the rate has increased to N730/$1.
