The Presidential candidate of the All Progressives Congress (APC), Asiwaju Bola Ahmed Tinubu, has rejected the method of the Central Bank of Nigeria, in tackling inflation in the country.
Tinubu, in his manifesto tagged, “Renewed Hope”, said raising interest rates is not the solution to rising inflation.
Recall that the CBN has raised the interest rate to arrest the sharp rise in inflation which rose in August to 20.52 per cent from 19.64 per cent in the previous month, the highest in 17 years.
Nigeria’s apex bank has raised interest rates three times in 2022. It first raised the rates to 13 per cent in May, 14 percent in July and 15.5 percent in October, the highest ever since 2006.
However, Tinubu said the current increasing inflationary trend was caused essentially by global supply disruptions, saying addressing it is not be increasing the interest rates.
“To impose the usual anti-inflation medicine of higher interest rates and tighter money-supply will only weaken the patient,” Tinubu said.
“The current surge of inflation is essentially driven by global supply and production disruptions beyond the control of any one government, including Nigeria’s. This is supply-driven inflation, not inflation caused by excess demand in an overheated economy.
“To impose the usual anti-inflation medicine of higher interest rates and tighter money-supply will only weaken the patient. The answer to supply-driven inflation is not to suppress normal aggregate demand levels.
“The better solution is to find ways to increase production and supply. To suppress demand will result in the overall loss of economic activity and jobs. Worse, since the inflation is grounded in supply side issues, placing this weight on the demand side will do little to answer the root causes of current inflation. In short, we punish the national economy and the people without deriving any meaningful benefit.”
Tinubu further stated that the efficiency of monetary policy in driving overall economic goals is limited, adding that Fiscal policy has numerous channels and transmission mechanisms by which it can affect the economy.
“Unlike monetary policy, fiscal policy can be channelled directly and even exclusively toward the poorer segments of society.
“Monetary policy transmission mechanisms are largely limited to banks and other financial institutions. By itself, good and wise monetary policy is insufficient to produce the level of growth we seek. However, bad monetary policy is sufficient in itself to sink the best of our economic dreams. Monetary policy must focus on the exchange rate, interest rate and price levels. This trio must serve the objective of fiscal policy, which is broadly shared prosperity.”