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LequteMan
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The credibility of the CBN governor, Godwin Emefiele, has come under intense scrutiny over his recent decision to ease monetary policy, while maintaining currency restrictions that are hurting the economy.
Emefiele had reduced the benchmark interest rate by 2 percentage points to 11 percent on Tuesday and lowered the cash reserve ratio to 20 percent in a bid to support Nigeria's struggling economy.
With importers blocked from accessing dollars, the liquidity boost may do little to increase output in manufacturing and other industries, while fueling inflation.
“It is difficult to overstate the degree to which this is a highly unorthodox move,” John Ashbourne, Africa economist at Capital Economics in London, said in a note to clients.
“Nigeria faces high inflation, pressure on its currency, and it desperately needs to attract foreign capital to fund the current account deficit created by low oil prices. It is, in short, in exactly the sort of situation in which economists would generally expect – and recommend – tighter monetary policy.”
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Emefiele had reduced the benchmark interest rate by 2 percentage points to 11 percent on Tuesday and lowered the cash reserve ratio to 20 percent in a bid to support Nigeria's struggling economy.
With importers blocked from accessing dollars, the liquidity boost may do little to increase output in manufacturing and other industries, while fueling inflation.
“It is difficult to overstate the degree to which this is a highly unorthodox move,” John Ashbourne, Africa economist at Capital Economics in London, said in a note to clients.
“Nigeria faces high inflation, pressure on its currency, and it desperately needs to attract foreign capital to fund the current account deficit created by low oil prices. It is, in short, in exactly the sort of situation in which economists would generally expect – and recommend – tighter monetary policy.”
Read more
