Inflation
By Olawunmi Ashafa
Lagos, May 23, 2018 (NAN) An Economist, Mr Titus Okurounmu, says a more conducive environment will lead to a significant decline in the inflation rate, as well as allowing the economy to jump-start and compete favourably with its pairs.
Okurounmu said this in an interview with the News Agency of Nigeria (NAN) on Wednesday in Lagos, against the backdrop of the Monetary Policy Committee’s retention of the Monetary Policy Rate (MPR) at 14 per cent.
NAN reports that the MPC also left the Cash Reserves Ratio (CRR) and the Liquidity Ratio at 22.5 per cent and 30 per cent, respectively.
The former Central Bank of Nigeria (CBN) Director of Research said a more conducive environment would allow businesses to thrive better.
This, he added, would make the inflation rate to drop from double digits to a single digit, which would then have a similar effect on the MPR, a lending rate benchmark.
Okurounmu also said that the MPR would continue to be higher than the inflation rate, if the price level remained high.
According to him, the inflation rate which stands at 12.48 per cent as at April, has not been coming down quickly enough in the last two years because of the over dependence on foreign products.
He said that the depreciation of the naira at N360 to the dollar was still in the climax and had continued to pose negative effects on the economy.
The researcher said the intervention by the Central Bank of Nigeria (CBN) might not give the desired effects as expected, if the demand for foreign exchange was still high.
Okurounmu also said the price level would be stable until the nation’s domestic products met its domestic demands.
The former CBN director said to achieve that, government needed to ensure an alignment in its fiscal and monetary policies.
Okurounmu said, “Our focus should be how to bring down both the exchange and inflation rates.
“Frankly speaking, what the economy is begging from us is to develop it, so that more goods and services will be available at cheaper rates.
“If the four refineries are working today, Nigeria’s petroleum demand would be met from domestic production.
“The country will be selling products and earning foreign exchange from the whole of West Africa and the world.
“This will in return improve our foreign exchange reserves and our exchange rate will become very good.”
The economist added that having a double digit interest rate would discourage prospective foreign investors from in investing in the country. (NAN)
AWA/ENN/PIO
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(Edited by Edwin Nwachukwu/Idonije Obakhedo)