Dr. Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), recently highlighted the adverse effects of excess money supply on the Nigerian economy, particularly referencing the N27 trillion Ways and Means loan and N10.5 trillion interventions from past administrations. These remarks were made during the BusinessDay CEO Forum in Lagos.
According to Cardoso, the Monetary Policy Committee (MPC), composed of independent-minded members, is focused on data-driven decisions to tackle inflation as their primary concern. He emphasized that the substantial increase in money supply through Ways and Means and various interventions has consequences that Nigerians are currently bearing.
Ways and Means refers to funds that the CBN lends to the Federal Government temporarily to support spending until revenue is generated. The scale of these interventions, coupled with other monetary actions, has significantly impacted inflation and economic stability.
Earlier, Cardoso had expressed concerns about the scale of interventions exceeding N10 trillion, not including Ways and Means, underscoring the magnitude of economic strain caused by such measures. The CBN has since suspended further intervention programs, recommitting to orthodox measures aimed at ensuring price stability.
Regarding interest rate adjustments, Cardoso defended the MPC’s decision to raise rates by 150 basis points to 26.25% during the latest MPC meeting. This move, he argued, was crucial in stabilizing the economy and preventing further depreciation of the naira against the dollar.
Looking ahead, experts anticipate further adjustments in interest rates, albeit at a slower pace, to manage inflationary pressures and support economic recovery efforts. The CBN’s shift towards prioritizing price stability over extensive monetary interventions signals a strategic pivot towards sustainable economic management.
In summary, the challenge of excess money supply underscores the delicate balance between fiscal support and macroeconomic stability in Nigeria, highlighting the imperative for prudent financial management and policy reforms to mitigate economic vulnerabilities.
