Getting Nigeria's monetary policy right

Nigeria's Central Bank is under scrutiny as experts like Dr. Ayot Teriba, CEO of Economic Associates, advocate for a more accommodating monetary policy stance to bolster the country's economic recovery. In a recent interview with CNBC Africa, Dr. Teriba highlighted the need to ease the tight monetary policy that has been in place for years, hindering economic growth. He pointed out the adverse impact of the stringent measures on the economy and stressed the importance of providing liquidity support to fuel the much-needed recovery. The history of monetary policy in Nigeria has been marked by tightening measures, with interest rates and cash reserve requirements seeing significant hikes, even during times of economic recession. Dr. Teriba expressed his dismay at the decision to tighten monetary policy amidst a recession, emphasizing the need for a more strategic approach to monetary policy. He argued that the current policy has led to a liquidity crunch, with the government and state agencies struggling to meet financial obligations. Contrary to claims of increased liquidity, Dr. Teriba contended that the economy remains starved of funds, calling for a reevaluation of how liquidity is measured in relation to the country's GDP. The debate around the impact of easing on the currency value was also addressed, with concerns raised about the potential destabilization of the Naira. Dr. Teriba proposed targeted interventions to address excess liquidity in specific banks, rather than imposing industry-wide regulations that could impede economic growth. He stressed the need for a nuanced approach to monetary policy that balances inflation concerns with the imperative to stimulate economic activity. The current tight monetary policy stance, in place since 2010, has been a point of contention, with Dr. Teriba urging the Central Bank to adopt a more flexible and growth-oriented strategy. He highlighted the detrimental effects of the current regime on economic growth, citing the need for a shift towards a more accommodative policy to drive Nigeria's recovery. Despite the challenges posed by the recession and external shocks, Dr. Teriba remains optimistic about Nigeria's economic prospects. He emphasized the need for proactive measures to address the root causes of inflation and ensure sustainable economic growth. As the debate continues on Nigeria's monetary policy direction, stakeholders await the Central Bank's next moves with anticipation, hoping to see a shift towards policies that will unlock the country's full economic potential.