Why CBN monetary policy is not working – Prof. Ife
Prof. Ken Ife, a Development Economist says the Central Bank of Nigeria’s monetary policy is not working because 80 per cent of the nation’s money is not in circulation.
Ife stated this during the 10th Convocation Lecture of Godfrey Okoye University, Enugu, on Friday 18th November 2022, with the theme “Nigeria: The State of the Macro-Economy”.
According to him, 40 per cent of the nation’s money is not banked while 40 per cent of citizens are living below the poverty line.
He said that the 80 per cent money amounting to N2.6trn that ought to have been made available to the commercial banks to lend to private sectors to create jobs was not there, thereby, strangulating the economy.
“They are denying the economy the capacity to create jobs”, the economist said.
He said redesigning of Naira should be done every five years, adding however that the country has not done it for the past twenty years.
Ife, who is the Lead Consultant of the ECOWAS Commission, noted that counterfeit currency in circulation might be higher than the legitimate money, making it impossible for CBN to know how much is in circulation.
The economist added that the activities of money launderers and ECOWAS policy had also made the Naira to be used in other countries without monitoring.
“All these have made transmission of monetary policy in the country a challenge and forced commercial banks to lend at a higher rate.
“Money laundering, intense speculation on the value of the Naira, frequent demand of ransom by kidnappers, and the Naira serving as the second currency in the 15 ECOWAS countries are affecting the quantity of our currency”, he said.
Ife explained further that there were structural factors responsible for cost-push inflation in the country such as paucity of power, bad roads, water, rail transport and the rising cost of diesel.