The Central Bank of Nigeria has continued to print money to finance the federal government’s budget deficit, a development that may undermine its ability to tame inflation, the Economist Intelligence Unit (EIU) has said.
The EIU noted that the CBN tightened monetary policy with a 150-basis-point hike in the policy rate in May 2022 as inflation stayed on an upward trajectory.
It said: “Expectations of inflation in Nigeria are understandably high after years of annual price growth above the central bank’s 9 percent target ceiling.
“The ability of the CBN to tame inflation through raising rates may be undermined by its continued direct financing of the budget deficit.”
The EIU said building credibility in the target rate had not been a priority in recent years. “The continued printing of money at the same time as tightening policy would prevent effective control of the price level, and is highly likely,” it added.
Credit: Business day