CBN continues to plunge CPI with tight monetary measures

Determined to continue lowering the consumer price index (CPI) and to reach its single-digit rate target by 2018, the Central Bank of Nigeria (CBN) has continued to retain its tight monetary measures to fight  inflation.

That appears to be yielding fruits as the consumer price index (CPI) has continued to maintain a downturn. Specifically, the CPI, which measures inflation, increased by 15.91 per cent in October, representing 0.07 percentage points drop from 15.98 per cent of September. The latest decline in CPI is the ninth consecutive disinflation year-on-year inflation since January 2017, according to the National Bureau of Statistics, which published  the latest CPI report.

In July 2016, it became clear  that inflation wanted to spiral out of control, but the apex bank raised the monetary policy rate (MPR), the benchmark interest rate, by 200 basis points to 14 per cent from 12 per cent, left the cash reserve ratio (CRR) and liquidity ratio unchanged at 22.5 per cent and 30 per cent, respectively, as well as retained the asymmetric window at +200 and – 500 basis points around the MPR. Ever since, the monetary authority has left the policy rates unchanged at the respective positions to ensure price stability.

Besides, the CBN also introduced several other policies to bolster its foreign exchange management and ultimately strengthen the value of the naira. 

Shortly tightening the monetary rate in July, mid June, the CBN re-introduced the flexible exchange rate regime whereby the market operated as a single market structure through the interbank/autonomous window. Also, as part of the framework, the exchange rate was designed to be market-driven using the Thomson-Reuters Order Matching System as well as the Conversational Dealing Book.

Economic analysts expressed no surprise at the continued decline in inflation especially with better management of the economy.  Particularly, the analysts made reference to efficient management of the foreign exchange, improved productivity and generally, relative stability in policy decisions as factors contributing to the continued downward movement  of the CPI.