IMF Calls for Review Of 2007 CBN Act

The mission to the International Monetary Fund(IMF) has stressed the need for review the 2007 Central Bank of Nigeria(CBN) Act in other to strengthen the apex bank’s capacity to ensure price stability as a way of addressing the long strand of high inflation prevalent in the country.

The IMF, in its Staff 2021 Article IV Mission statement on Nigeria, noted that, the long-term high inflation in Nigeria is associated with the lack of a well-functioning monetary policy operational framework along with the presence of multiple policy goals.

Stating that, in the medium term, the monetary operational framework should be strengthened to establish the primacy of price stability reiterated its previous advice to modernise the 2007 CBN act.

It said this will help “establish the primacy of price stability and strengthen the monetary transmission mechanism by integrating the interbank and debt markets and using central bank or government bills of short maturity as the main liquidity management tool.

“As the recovery firms up, the CBN also needs to scale back its credit intervention programs as part of a broader monetary structural reform. Monetary policy should remain supportive of the nascent recovery but warrants close monitoring.

With the recovery yet to be broad-based, inflation projected to decline, and limited fiscal policy space, monetary policy should remain supportive unless exchange rate pressures intensify, or inflationary pressures resurface.”

The mission advised vigilance to prevent possible adverse feedback loops between persistent high inflation and periodic exchange rate adjustments if monetary policy were to become excessively loose

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