Inflationary pressures to decline in 2024 - CBN

…Targets 21.4 per cent inflation

By Abiodun OBA

The Central Bank of Nigeria (CBN) says that inflationary pressures are expected to decline in 2024 due to its inflation-targeting policy, which aims to rein in inflation to 21.4 per cent.

The CBN Governor Yemi Cardoso declared at the 2024 Macroeconomic Outlook of the Nigerian Economic Summit Group (NESG).

He explained that economic growth would also be aided by improved agricultural productivity and the easing of global supply chain pressure, which will benefit businesses by boosting consumer confidence and purchasing power.

“The anticipated moderation in pump prices of PMS, due to the expected operational status of the country’s government and private-owned refineries in 2024 is a pivotal factor in the economic equation.

“The economic stabilisation or reduction in fuel cost is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience. Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 per cent.

“This will be aided by improved agricultural productivity and the easing of global supply chain pressures, benefiting businesses by boosting consumer confidence and purchasing power.”

The CBN chief said the apex bank’s adoption of inflation targeting framework involves clear communication, use of monetary policy instruments and collaboration with fiscal authorities to achieve price stability and positively influence consumer behaviour.

He insisted that decreasing inflation will have a profound impact on businesses, providing a more predictable cost environment and potentially, leading to lower policy rates, stimulating investment, fuelling growth and creating job opportunities.

Justifying the reversion to its traditional monetary roles, he said the bank now focuses on Nigeria attaining price stability, which fosters sustainable economic growth.

Cardoso hinted that CBN is collaborating with the Ministry of Finance and Nigerian National Petroleum Company Limited (NNPCL) to ensure that all FX inflows are returned to the apex bank, saying this coordinated effort would greatly enhance the FX liquidity and contribute to the accretion of reserves.

“The expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN. This reform is designed to streamline and unify the exchange rates, fostering transparency and reducing arbitrage opportunities.

“The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors. We are implementing a comprehensive strategy to improve liquidity in our FX markets in the short, medium, and long term. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years,” he said.

Cardoso further highlighted that upholding the integrity of financial markets is crucial for building confidence.

He disclosed that with the completion of an innovative forensic review, the CBN was addressing the backlog of valid FX transactions and that it would remain steadfast in its commitment to the market, adding that the bank is not able to decisively address infractions and abuses.

He argued that to stabilise the exchange rate, it is imperative that the CBN prioritises transparency and create a market environment that enables fair determination of exchange rates, ensuring the stability of businesses.

For the umpteenth time, Cardoso declared that the naira is undervalued stressing: “We believe that the naira is currently undervalued and coupled with the coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term. This coordinated approach will contribute to a more balanced and stable exchange rate.”

To move from being talk shops to making impacts, Cardoso stressed the need for the NESG to borrow a leaf from the Lagos Economic Summit tagged ‘Ehingbeti’.

“I am proud to have been a pioneer of economic summits for sub-national governments through the Lagos Economic Summit, ‘Ehingbeti’, in the year 2000. Twenty years later, I was invited back to co-chair the 20th anniversary of ‘Ehingbeti’. Indeed, a good number of the transformative projects that have been birthed today in Lagos came to life from the ‘Ehingbeti’.