Central Bank of Nigeria (CBN) cannot currently fund more intervention programmes amid rising food inflation, the apex bank Governor, Yemi Cardoso has disclosed.
Gatekeepers News reports that Cardoso stated this on Friday while speaking during a plenary session on the Senate floor.
He said the apex bank has halted over N10 trillion quasi-fiscal measures which were disguised as “intervention programs” over the years.
According to him, this excess liquidity in the economy has caused distortionary effects, resulting in the uptick in core inflation and food inflation respectively.
In his words: “On our side at CBN, we have responded with significant monetary policy tightening to rein in inflationary pressures. Empirical analysis has established that money supply is one of the factors fueling the current inflationary pressure. For example, an analysis of the trend of money supply spanning over nine months shows that M3 increased from N52 trillion in January 2023 to 68.2 trillion in November 2023, representing a 31% increase over the period.
“We have also halted quasi-fiscal measures totalling over N10 trillion at the CBN previously disguised as development finance interventions. These measures have contributed to an increase in money supply, raising prices to the level of inflation we are grappling with today.
“On the issue of development finance, we’re coming to terms with a large amount of liquidity that was pumped into the system that created a lot of distortions and a lot of it didn’t get to what it was designed to get to.
“All we are saying as the central bank is that we cannot engage in interventions.”
Speaking further, Cardoso noted that the CBN, while it lacks the capacity, is working to partner with other ministries on the fiscal side to promote efficient and strategic programmes.
According to him, the CBN will be an intermediate mechanism for those who can provide financing for intervention programmes to help curb rising food inflation in the country.
“We will work closely with those that have that ability and help them to create capacity and to be a conveying mechanism for those that have that capacity to do it.
“So, it will be a partnership as opposed to a situation where we get involved in it directly. And as I say, run the risk of failed interventions which are typically inflationary.
“The CBN adoption of inflation-targeting framework involves clear communication and clarification with fiscal authorities to achieve stability, potentially leading to lower policy rate and creating job opportunities,” he added.
