By Ademola Alawiye

Monday, 22 Nov 2010

Analysts have urged the Central Bank of Nigeria to mop up excess liquidity in the system so as to further reduce inflation rate in the economy.

Inflation rate dropped for the second consecutive month in October to 13.4 per cent from 13.6 per cent in September due to good harvest in the country‘s damped food prices.

An economic consultant, Prof. Kayode Familoni, said double digit inflation was still on the high side.

He said, ”Although, there has been an improvement in the inflation rate, the fact remains that any double digit inflation rate is considered high. The target should be single digit.”

He added, ”The financial authorities should embark on monetary and fiscal tightening. The government should also refrain from wide and excessive spending. When you go to the market place, you will feel the inflation. ”

Familoni also noted that the government should apply caution on borrowing.

He, however, said that Central Bank of Nigeria should be independent enough to play its role effectively as a monetary authority.

An economist, Dr. Wale Ositelu, said that the changes were minute, noting that the MPC focus should be on how to bring the inflation rate to a single digit.

Ositelu said, ”The MPC meeting should focus more on how to mop up excess liquidity so as to tackle inflation.”

Speaking differently, the Chief Executive Officer, Economic Associates and member of the National Economic Intelligence Committee, Dr. Ayo Teriba, said that the year-on-year measurement was overstating the inflation rate.

Teriba said, ”I think the year-on-year measurement of inflation exaggerates inflation in Nigeria. In actual sense, we already have a single digit inflation rate. If you analyse the month-on-month inflation rate, you will realise that we have single digit inflation already.”

He added, ”The changes reflect more when you look at the month-on-month changes in the rate.I don‘t think there are inflationary pressures in the country.”

The CBN had raised its monetary policy rate to 6.25 per cent in September, as part of measures to reduce the inflation rate.

 

Source: Punch