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Home Economy/Technology

World Bank blames CBN for inflation

Inflation

The Matters Press by The Matters Press
January 4, 2023
Reading Time: 2 mins read
0
NBS reports increase in Inflation

The World Bank has accused Central Bank of Nigeria (CBN) of instigating inflation because of its policy of financing of the fiscal deficit.

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The Bank also noted that interest payments on the Nigerian government’s borrowing from the CBN will gulp over 62 percent of its total revenue by 2027.

The Britton woods institution made this known in the latest edition of its Nigeria Development Update (NDU) titled, ‘Nigeria’s choice’.

With the Nigeria’s government borrowing from the apex bank through its Ways and Means advances, to finance budget deficits, there have been concerns that its stock of loans may be heading to unsustainable levels if left unchecked .

In its latest report, the World Bank said interest payments on such advances will increase by 2.4 percent points of the gross domestic products (GDP) between 2018 and 2027.

Just last year, some economic experts had warned that Nigeria’s advances to the Federal Government in the seven years of the Muhammadu Buhari administration grew to over N23.8 trillion, in a trend seen as a violation of the fiscal responsibility law, triggering inflation and aggravating the country’s debt burden.

In a similar vein, the International Monetary Fund (IMF) had last November, warned that the CBN’s continued financing of the country’s deficit through Ways and Means will complicate government’s effort to contain inflation.

The global institution added that financing of the fiscal deficit through Ways and Means continues to fuel inflation by increasing liquidity in the money market.

The report added that at least five million Nigerians were pushed into poverty as a result of rising inflation between January and September 2022.

The World Bank estimates that between 2020 and 2021, inflation left about eight million more Nigerians below the poverty line by increasing the total number of poor people to about 90 million.

But higher inflation in 2022 is estimated to have pushed an additional five million Nigerians into poverty between January and September 2022, largely through higher prices of foods especially in urban areas.

The report said that inflation is partly the result of monetary, exchange rate and fiscal policy decisions.

“After loosening monetary policy through September 2020 to help combat the economic impact of the pandemic, the CBN left its monetary policy rate unaltered until May 2022, making it one of the last emerging economies to begin tightening policy,” the report said.

“CBN has implemented measures to curtail inflation, raising the monetary policy rate by 500 bps and the cash reserve ratio by 500 bps.

Tags: Inflation
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