Freethinker87:


I don't even blame the Cardoso - His name sounds like a flavoured alcoholic beverage. Look at the man, he studied Business Admin at University due to his fear of mathematics. The day he finished his NYSC, he was appointed as the Vice President of the defunct Citi Bank through a family connection. That was how he got into banking.

I'm not making these things up, look at his resume.

Omoh....people get mouth for this forum ooo.
His name sounds like a flavoured alcoholic beverage...chaii

OboOlora:

Trial and error financial techniques.
Pump $$$ from foreign reserves to save a dying naira so people can applaud you for a week.
Then watch the same $$$ rise in the next month and blame citizens for not buying unavailable local goods.

Exactly. Voodoo economics.

Elliotwaveforec:

So, economic growth is the only macroeconomic challenge Nigeria has, right? What about inflation, price stability, etc.?

In this present economic situation, which of the challenges needs to be prioritised? Don't you think when the exchange rate is stable, there would be confidence in the economy and price would stabilise as the number one cause of inflation in Nigeria today is weak exchange rate? I hope you know it's not only monetary policy that can be used to spur growth? Fiscal policy is available too!

/
While we shout "inflation", it will be proactive to understand the causes of inflation in Nigeria --insecurity begets food inflation as kidnappers prevent farmers from unhindered access to their farms. Let's not delve into abrupt removal of oil subsidy without planning ahead for palliatives. Floating of naira when the country is heavily import-dependent with no production/manufacturing base and the only major source of forex known as oil is marred by corruption and theft. Even in the forex transactions, corruption via arbitrage and prebendalism are the orders of the day. What's the nation's foreign reserve?

As noted earlier, what Cardoso and team are doing is akin to signing up Nasarawa United FC to play in the English Premier League. A child must learn to walk first before attempting to run.

The current problem in Nigeria is not inflation but stagflation--inflation in a stagnant economy.

/

jmoore:

It means interest rate has increased.
It will scare people from borrowing.
And those who borrow will have to increase their cost price which will increase the selling price, thereby making inflation higher.

Nope.
There’s excess money supply in the economy which is part of what’s causing inflationary pressures. The increase is to mop up money supply.

OboOlora:

Trial and error financial techniques.
Pump $$$ from foreign reserves to save a dying naira so people can applaud you for a week.
Then watch the same $$$ rise in the next month and blame citizens for not buying unavailable local goods.

We’re in an era of confident, ignorant people.

What do you owe me if this your prediction fails?
Put your money where your mouth is.

Freethinker87:


CBN is lending to banks at 25%, banks will lend to businesses with an interest, so 32% is a fair estimate. Some businesses won't survive such high interest repayment so they'll fold. Businesses who do, will pass that cost to their customers.

So in football terms, expect prices of locally produced goods and services to go up. Expect layoffs, poverty and austerity in the coming months. While Chief Tinubu celebrates lowering inflation rate in Aso rock.

Thank you Chief

Freethinker87:


Mr Economist.

While I understand the steps taken by the CBN to control inflation, I respectfully disagree with your perspective.

Increasing MPR to 25% means that banks will offer loans at over 32%. This new interest regime will be detrimental to businesses that rely heavily on loans for their operations.

With such high-interest rate, the cost of borrowing will go up, significantly reducing the overall liquidity available to businesses.

This will certainly lead to a slow-down in business operations, entrepreneurship, and consequently the economy like Chief Tinubu promised during the campaign. Nigeria does not have an excess liquidity problem, we're suffering from a FX scarcity.

It is highly unlikely that any legitimate business can survive, let alone thrive, under this condition. FGS businesses are struggling currently, with many multinationals shutting down operations in Nigeria. How much more SMEs?

Instead of mopping up money from the system, providing financial support and grants to businesses and entrepreneurs can stimulate the economy and eventually strengthen the Naira, but No! let's use our scarce FX to sponsor Hajj tourism to Mecca and import foreign SUVs for legislators while the illegitimate President and his wayward son travel in a 70-vehicle convoy.

A lot of what you said about the danger of monetary policy is actually true.

And that is why many countries have independent central banks whose primary goal is to maintain price stability which basically means low inflation.

The central bank will go out of its way to achieve that, even if means hiking interest rates till it drives the economy into a recession. It does not care.

Politicians nor interest groups can't dictate to it. Only when inflation is contained will it begin to lower interest rates. The major economies of the world are currently in a recession or near one because central banks in these countries are trying to rein in inflation using a tight monetary policy. Inflation.ran amok during the early 2020s as economies tried to reflate their economies due to the Pandemic which ground all economic activities Inflation was basically dead.

They used loose monetary policies such as printing money and low interest rates and loose fiscal policies such huge government spending in the form of overgenerous Covid checks to individuals. However, they went too far and inflation had the highest spike they've ever seen in decades. Normally, their inflation target is around that 2% figure. It hit close to 10%

The central banks began increasing interest rates to bring inflation but have not been tight enough as this was a once off case. Nevertheless, economies of these big rconomies are in a recession.

The central bank does not care about how I, you or the president feels. It must bring inflation down.

I am just telling you the blunt truth. The only reason why Cardoso may have encountered problems raising interest rates higher much sooner may be due to a love by the Presidents for low interest rates like you.

Tinubu has no right to dictate to the CBN but Cardoso is powerless as he his Tinubu's boy. I suspect that is why Cardoso hasn't been aggressive enough in regards tackling inflation.

I do believe a messed up float and exchange market might have contributed to inflation but he should nevertheless have moved aggressively against high inflation. Calls for inflation to be fought actually began after the "petrol subsidy removal", which led to a spike in prices. It began well before the Naira Float.

When he increased the MPR from 18.75 to 22.75, the exchange rate went overnight from. $1-1,900 to 1,650 or so. Cardoso had the means to contain things.

If the market trusts he will fight inflation when he has to, this will put faith in the economy and the Naira. He hasn't shown that mettle. That inflation is falling isn't enough

I know this wasn't what you wanted to hear but this is the blunt truth. What I or you think or even the president's is not the central banks cup of tea.

The central bank should keep far from developmental finance. That was Emefieles speciality. Thank God he is gone.

Such grants are eventually largely stolen with most of it never repaid.

The best policy is affordable credit from commercial banks. This can be achieved by bringing inflation down, and then bringing interest rates down with it.

There's also the fiscal aspect. Federal government budget must either balance or be low. The higher your budget deficit, the higher your inflation rate is bound to be.

In addition, Henry Boyo, a late Nigerian economist noticed that any time the monthly allocation is shared to the 3 tiers of government, he noticed there's a spike in inflation, due to an increase in the money supply. The CBN now uses costly bonds to mop up the excess money which ultimately leads to costly commercial bank loans.

He suggested if the dollar component of those allocations could be paid in dollars instead using dollar certificates, this will help curb the excess money.

He said paying the dollar component in Naira is very inflationary. He said pay the dollar component in dollar certificates. This will instantly stop the Naira spike.

Next when the 3 tiers of government want to redeem their dollar certificates at commercial banks, it would be as though dollars were chasing the Naira which would lead to a massive appreciation of a Naira.

A mixture of no excess money in circulation and a strong Naira would lead to a sharp drop in inflation

The CBN can start rapidly reducing interest rates until it hits single digits. Charles Soludo actually tried to implement this but was frustrated by people within the CBN and the governors who felt a great unease with the dollar certificate papers (they probably would have preferred real dollar notes).

ogawisdom:


PPL are borrowing naira to buy USD , this policy will affect those speculators & appreciate the naira.

Absolutely not! Speculators will speculate whether the Naira rise or fall. Have you seen a trading screen? There's a stop-loss-order and a short feature. The only people that'll suffer from this reckless monetary policy are small businesses and consumers.

jmoore:

If business A borrows money at 24.75 % and business B borrows money at 15%. With all other factors being equal, which should have a higher selling price?

Is a higher selling price not inflation?

Business A wont have to borrow because of the high interest rate.

NiceNice...

InvertedHammer:

/
While we shout "inflation", it will be proactive to understand the causes of inflation in Nigeria --insecurity begets food inflation as kidnappers prevent farmers from unhindered access to their farms. Let's not delve into abrupt removal of oil subsidy without planning ahead for palliatives. Floating of naira when the country is heavily import-dependent with no production/manufacturing base and the only major source of forex known as oil is marred by corruption and theft. Even in the forex transactions, corruption via arbitrage and prebendalism are the orders of the day. What's the nation's foreign reserve?

As noted earlier, what Cardoso and team are doing is akin to signing up Nasarawa United FC to play in the English Premier League. A child must learn to walk first before attempting to run.

The current problem in Nigeria is not inflation but stagflation--inflation in a stagnant economy.

/

I asked you a simple question, if you were the CBN governor, would you prioritise growth over price stability?

Monetary police to tackle inflation; and fiscal policy to tackle economic stagnation! And that's what the CBN is doing and they are on the right path.

Ensure price stability first and then start measures to spur growth.

SmartyPants:


You have no clue. Inflation is sky high and you are talking about flooding the economy with money to promote new businesses. Secondly, this is being done to further stabilize the naira by attracting fresh portfolio investment. Do you understand all this?

You are obviously the one that is clueless about how the economy works. The question you should ask is what is causing the excess liquidity in the system and this is due to government's fiscal irresponsibility and huge deficits as a result of budget padding. To stabilize the Naira, what needs to be done is to cut down drastically on government expenditure while the productive sector of the economy is well funded to stimulate growth in the economy. Increased production will also bring down the rate of inflation.

This is the right thing to do instead of the daft and senseless increase in interest rates to further stifle productivity.

MrPristine:


You are obviously the one that is clueless about how the economy works. The question you should ask is what is causing the excess liquidity in the system and this is due to government's fiscal irresponsibility and huge deficits as a result of budget padding. To stabilize the Naira, what needs to be done is to cut down drastically on government expenditure while the productive sector of the economy is well funded to stimulate growth in the economy. Increased production will also bring down the rate of inflation.

This is the right thing to do instead of the daft and senseless increase in interest rates to further stifle productivity.

Lol. This is elementary economics and I don't know why you are arguing. In fact, it is obvious common sense.

When production increases, businesses earn more money which flows into income for the owner and for labour, which in turn flows into households who then have more spending power, which creates more demand and obviously then leads to inflation. Usually, this is good inflation as long as it is managed well. Unfortunately, inflation is already way too far out of control to accommodate any further increases.

It doesn't particularly matter how the inflation came about. The fact is, once there is inflation, you cannot increase the money supply in the economy. You should rather take steps to contract the money supply by reducing the velocity and quantity of money in the economy. Other steps as you've mentioned should also be taken to curtail future inflation - but to deal with the present one you must stifle the flow of money into the economy.

SmartyPants:


Lol. This is elementary economics and I don't know why you are arguing. In fact, it is obvious common sense.

When production increases, businesses earn more money which flows into income for the owner and for labour, which in turn flows into households who then have more spending power, which creates more demand and obviously then leads to inflation. Usually, this is good inflation as long as it is managed well. Unfortunately, inflation is already way too far out of control to accommodate any further increases.

It doesn't particularly matter how the inflation came about. The fact is, once there is inflation, you cannot increase the money supply in the economy. You should rather take steps to contract the money supply by reducing the velocity and quantity of money in the economy. Other steps as you've mentioned should also be taken to curtail future inflation - but to deal with the present one you must stifle the flow of money into the economy.

You obviously can't distinguish between demand pull inflation and cost push inflation and the different strategies for tackling them. What we have in Nigeria is cost push inflation but government is using interest rates increase which is a strategy for tackling demand pull inflation to tackle it and in the process creating more problems while inflation remains high.

That said, I am not suggesting that money supply be increased. Rather I am suggesting that the existing money in the system be channeled into more productive ventures and this can be achieved if government reduces their deficit spending and instead allow the banks to use the same money being used to fund the deficit (excesses and looting) to fund productive activities in the economy.

MrPristine:


You obviously can't distinguish between demand pull inflation and cost push inflation and the different strategies for tackling them. What we have in Nigeria is cost push inflation but government is using interest rates increase which is a strategy for tackling demand pull inflation to tackle it and in the process creating more problems while inflation remains high.

That said, I am not suggesting that money supply be increased. Rather I am suggesting that the existing money in the system be channeled into more productive ventures and this can be achieved if government reduces their deficit spending and instead allow the banks to use the same money being used to fund the deficit (excesses and looting) to fund productive activities in the economy.

Lol... I think you would be best served by listening here because your responses are all over the place.

1. I have just demonstrated to you that increasing productivity can trigger demand-pull inflation while making the point that we can't afford extra inflation (regardless of whether the current inflation is cost-driven). I further concluded by agreeing that the steps you recommended can come in the future. That is to say: bring cost-push inflation to a halt first, then increase production afterwards, so that demand-pull inflation does not add to the existing cosh push inflation. Is that a complex argument?

2. The MPR was only just increased (nearly doubled) just a month ago. This obviously begs the question, why didn't the previously lower rates stimulate increased business investment and productivity to slow down inflation? The answer is that, excess liquidity has been going into the purchase of US dollars as a high-growth asset, thus driving the cost-push inflation you spoke of, given Nigeria's import dependence. So if you like, reduce the MPR to 1% - it won't increase business spending as long as the dollar remains overvalued to the naira. This leads to point 3.

3. As I earlier mentioned in my first reply, increasing the MPR is also about attracting foreign portfolio investment which is critical for driving down the cost of the USD dollar, which is the major driver of cost push inflation at the moment. Drive down the cost of the dollar and bring the naira to its true value and we can cycle back to point one: tackle cost factors first then stimulate the economy second.

SmartyPants:


Lol... I think you would be best served by listening here because your responses are all over the place.

1. I have just demonstrated to you that increasing productivity can trigger demand-pull inflation while making the point that we can't afford extra inflation (regardless of whether the current inflation is cost-driven). I further concluded by agreeing that the steps you recommended can come in the future. That is to say: bring cost-push inflation to a halt first, then increase production afterwards, so that demand-pull inflation does not add to the existing cosh push inflation. Is that a complex argument?

2. The MPR was only just increased (nearly doubled) just a month ago. This obviously begs the question, why didn't the previously lower rates stimulate increased business investment and productivity to slow down inflation? The answer is that, excess liquidity has been going into the purchase of US dollars as a high-growth asset, thus driving the cost-push inflation you spoke of, given Nigeria's import dependence. So if you like, reduce the MPR to 1% - it won't increase business spending as long as the dollar remains overvalued to the naira. This leads to point 3.

3. As I earlier mentioned in my first reply, increasing the MPR is also about attracting foreign portfolio investment which is critical for driving down the cost of the USD dollar, which is the major driver of cost push inflation at the moment. Drive down the cost of the dollar and bring the naira to its true value and we can cycle back to point one: tackle cost factors first then stimulate the economy second.

Brilliant!

Elliotwaveforec:

I asked you a simple question, if you were the CBN governor, would you prioritise growth over price stability?

Monetary police to tackle inflation; and fiscal policy to tackle economic stagnation! And that's what the CBN is doing and they are on the right path.

Ensure price stability first and then start measures to spur growth.

/
1. Reduce interest rates to bare minimum to spur growth. SMEs are the engine of third world economy.

2. CBN printed trillions of naira since 2020 that is not circulating in the country. The funds were given to their cronies that converted such to foreign currencies domiciled in foreign banks. They printed so much money yet there is no money in circulation that banks had to resort to rationing available funds. Go figure!

Nigeria is not working because people choose to embrace the rhetorics of the people at the helm of affairs as the ultimate truth. Yet there has been no light at the end of the tunnel in 10 years.

Monetary policy. Fiscal policy. You are still reading too many textbooks. Policies must be tailored to local contents. IMF and World bank prescriptions rarely help any country. It is like taking financial advice from purveyors of loan apps.

/

KORLAR:


Nope.
There’s excess money supply in the economy which is part of what’s causing inflationary pressures. The increase is to mop up money supply.

Ever heard of cost push inflation?

You guys don't know that price of petrol that went from 165 to 650 naira and high cost of diesel is the major factor of the inflation.

jmoore:

Ever heard of cost push inflation?

You guys don't know that price of petrol that went from 165 to 650 naira and high cost of diesel is the major factor of the inflation.

There’s that and there’s excess money supply.

Watch and see, prices for some commodities have started reducing; more will follow.

ppogba:


It is because greedy Nigerians who should rather look themselves in the mirror but will rather blame everyone except themselves made it so.

The vulcanizer who wants to collect N500 to gauge a tire blaming the rise in the exchange rate belongs in this category.

The one who has not seen a greenback before but is shouting at the roof top belong in this category.

.

Greed is what is messing up everything in Nigeria

CodeTemplar:
goods were produced when dollar rate was high so expect prices to crash very slowly.

How many sellers bought good when $$$$ was high? People always use that as excuse to rip people off.