The Central Bank of Nigeria’s fiscal tightening measures slowed the country’s economy by impacting negatively on the real sector last year, analysts have said.

Economic and financial experts who spoke with our correspondent on Monday noted that the CBN must loosen its tight monetary policy  in 2012 if the country’s economy must grow.

They said the apex bank should consider adopting other options that would guide against high rate of inflation, rather than continuously hiking the Monetary Policy Rate, otherwise known as the the benchmark interest rate.

The Chief Executive Officer, Economic Associates, Dr. Ayo Teriba, said there was more to the economy than inflation, and stressed that the CBN could not  be looking at a single variable to justify its interest rate increase.

He noted that inflation was not the most important variable in the economy, adding that the real growth of the economy was more important than the fight for single digit inflation.

He said, “The growth of employment is more important than inflation. With all the tightening that we saw in 2011, we started at 10 per cent inflation and we ended at 10 per cent inflation; so there may be some components of the inflation that are structural and will not respond to monetary tightening.

“So what we are seeing is that the tightening is not achieving any significant impact on inflation, but is probably achieving impact on real growth, for it is slowing down the real growth and it is slowing down the employment recovery.”

In its drive to curtail inflation, the Monetary Policy Committee of the CBN, at an emergency meeting on October 10, 2011, raised the benchmark interest rate by 275 basis points to 12 per cent from 9.25 per cent. The MPC increased interest rates six times last year.

“I think it was wrong for the CBN to tow the line that it towed in 2011 on monetary tightening; it was   based on a narrow objective of reducing  inflation and  ignored the vulnerabilities of real sectors and real activities to monetary tightening,” Teriba said.

Source: Punch/Okechukwu Nnodim