Emefiele: Inflation Rate will Fall Steadily to Less than 15 Percent by Q4 2023

*Says apex bank succeeding with various monetary policy measures

Nume Ekeghe

The Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele has stated that with the various monetary policy tools in use by the CBN, he foresees inflation figures declining steadily to below 15 per cent by the end of 2023.
Figures from the National Bureau of Statistics (NBS) indicated that inflation in Nigeria increased by a record 5.09 per cent to 21.09 per cent year-on-year in October 2022, compared to the corresponding period of 2021.

But Emefiele, who was speaking at the 57th annual Banker’s Dinner hosted by the Chattered Institute of Bankers of Nigeria (CIBN) in Lagos, yesterday, noted that the 2023 elections would trigger a slight increase in inflation, but afterwards, there would be a continuous deceleration of inflation.
He said: “Inflation expectations are rising as existing structural rigidities are compounded by global factors and anticipated election-related liquidity upsurge. For the rest of 2022 and towards mid-2023, Nigeria’s rate of inflation is projected to remain elevated and above the 12.5 percent growth-aiding threshold.

“However, on the backdrop of our previous policy measures, and as the effect continues to permeate the system, our inhouse model-based simulations indicate that inflation rate could fall steadily to less than 15 percent by end-2023.”    

He added that as external conditions flounders, inflationary pressure is expected to worsen and become more persistent in many economies.
He added: “The rate in key advanced economies is projected to remain historically elevated at double digit levels up to the 2023 third quarter at the earliest. As such, tight monetary conditions will remain prevalent over the short-term, straining financial markets in many EMDEs and exacerbating the underlying vulnerabilities.

“Considering the current developments in both the global and domestic economies, and based on extensive simulations, the CBN is of the view that the short-term outlook of the Nigerian economy remains good.”
Furthermore, on his 2023 forecast, he noted that monetary policy over the coming years would remain focused on the objectives of price, monetary, and exchange rate stability.

“Our policy stance will, accordingly, remain tight to curtail inflation pressure, regulate capital flows, and buoy the naira-dollar exchange rate. Monetary policy decisions will remain balanced, judicious, research-driven, adequate and supportive of the real economy subject to underlying fundamentals.

“We will maintain the current tight Monetary Policy stance in the near-term, especially in view of rising inflation expectations and exchange market pressures. Though, we will act to appropriately adjust the policy rate in line with unfolding conditions and outlooks.”
On Nigeria’s GDP, he expressed that based on the expectation of a robust non-oil performance, and barring any unforeseen shocks, GDP growth rate is projected to remain positive in the remaining quarter of 2022 and during 2023.

He said: “The performance of the non-oil sector will be buoyed by the continued efforts at entrenching indigenous productivity in high-impact real sector activities, especially agriculture, MSMEs, and manufacturing. Domestic aggregate demand is further expected to be bolstered by the anticipated budgetary outlay and the surge of electioneering spending in the next few months. From 3.54 per cent in quarter two of 2022, growth is projected to reach 3.7 percent in quarter three and 3.47 per cent by the fourth quarter.”

On the exchange rate, he added that though the CBN has so far managed to maintain exchange rate stability, the current capital flow reversals from emerging markets are expected to continue to exert considerable pressure on market rates.
“This pressure could be amplified by the forthcoming elections, especially as the political marketplace heats up. Notwithstanding these pressures, the CBN is determined to maintain its stable exchange policy stance over the next few months through innovative policy measures to manage the demand and supply of foreign exchange.

“If the current problem of oil theft is promptly corrected, we could expect a resumed inflow of crude oil receipts into the official reserves. This could foster gross stability in the foreign exchange market and enhance exchange rate stability.

“Overall, our balance of payments is expected to remain positive in the short-term. We have seen a recent boost in non-oil exports receipts to about US$2.5 billion. Hoping that the poor performance of the oil sector reverses, especially as high crude prices is sustained by a potential elongation of the Russian-Ukraine war, we expect the Current Account Balance to strengthen even further. This will be backed by our resolute effort to strengthen and improve real non-oil sector productivity through apt diversification to reduce undue imports.”

He further added: “Given the global and domestic headwinds we face as a nation, and the volatility in the global environment, we have no other option, as leaders interested in the progress of our nation, but to work very hard to spur job creation by reviving agricultural and industrial activities in the country.
“Like I have said many times before, if we continue to support the growth of small holder farmers, you can only imagine the amount of wealth and jobs that will be created in the country. If we turn a blind eye to the opportunities provided by our enormous human and material resources, this could spell doom for our nation.”

On his part, the President and Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN) Ken Opara said: “I would to use this medium to acknowledge and appreciate Godwin Emefiele for his contribution to the identity and economy as a whole especially in maintaining a sound financial system and economic growth

“The CBN has over the years continued to contain economic shocks  from the aftermath of the COVID-19 pandemic to stimulate the economy, fight inflation and other related economic issues, most especially the global currency from distortion exacerbated by the declining production fueled by the high cost of production, insecurity, foreign exchange volatility and uncertainties in the global oil market.”