Photograph — Money

On February 15, 2024, the National Bureau of Statistics (NBS) reported that inflation in Nigeria had soared to 29.90 percent in January 2024. According to the World Bank, inflation had pushed an estimated 24 million Nigerians into poverty within five years. This surge compounds an existing economic crisis, with about 133 million Nigerians classified as multidimensionally poor. Hence, inflation jeopardizes fundamental human rights like the right to food, education, and work. These effects highlight the necessity for the Central Bank of Nigeria (CBN) to review its monetary policies. It also emphasizes the need for public institutions at all governmental levels to tackle the root causes of inflation in the country.

In the past, the CBN  struggled with significant challenges in credit control and money supply management. The current CBN governor, Yemi Cardoso, is already trying to address this by pausing interventionist financing and Ways and Means Advances (WMA). These two financing methods are considered major inflation drivers. The WMA is a means through which the CBN lends money to the federal government, leading to concerns around legal limits and fiscal prudence. In addition to these efforts from the CBN, the federal government needs to rely less on inflationary financing. Instead, it should seek alternative financing from an enhanced tax system, a thriving oil sector, and low-interest loans.

The CBN must adopt a fixed exchange rate regime and implement stringent monetary policies, such as credit controls. However, the fixed exchange rate system should be temporary until the inflation rate drops significantly. The fixed system should be temporary because it is expensive to maintain and can trigger critical market distortions in the long run. These measures, when coupled with fiscal austerity, effectively curb inflation. Uzbekistan deployed this strategy to reduce its inflation rate from 12.2 percent in February 2023 to 9 percent in August 2023. 

Also, a stable naira is fundamental to curbing inflation and creating a healthy economic environment in Nigeria. When the naira depreciates, the cost of imported goods rises, fueling inflationary pressures across the country. To counter this, the CBN and the government can draw inspiration from Armenia’s recent success story. They can proactively attract foreign investment through economic diversification, prudent fiscal policies, and boosting access to forex. These strategies can successfully strengthen the naira against the dollar. 

Moreover, the federal and state governments must tackle insecurity and flooding, which are other non-economic contributors to inflation. The federal government needs to re-train and restructure the national security parastatals to improve national security. Also, the Ministry of Environment and related organizations at the federal and state levels should work together. They should design effective climate solutions and ensure transparent utilization of the ecology fund to combat flooding. An effective flood control measure can involve proper land planning that ensures drainage for the smooth passage of water. It can also mean providing farmers with early warning and emergency response systems nationwide. A country cannot thrive when its citizens go to bed afraid and hungry. Addressing these issues is critical to securing the fundamental human right to life and food.

The surging inflation in Nigeria is not merely an economic woe. It is a threat to the core of our existence – our human rights. The responsibility lies not only with the CBN but also with the federal and state governments to enact swift and decisive measures. The path to economic recovery is intertwined with restoring basic human rights. Public institutions at all governmental levels need to ensure that every Nigerian can live a life of dignity, away from inflation-induced poverty. 

Written by Sami Tunji

Sami Tunji is a writing fellow at African Liberty.

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