The Director of the Monetary Policy Department at the Central Bank; Hassan Mahmud has projected a single-digit inflation rate in the economy in 2022. He made this prediction during a midyear review of the economy in 2021 which was organised by The Chartered Institute of Bankers and Adedipe & Associates. He also predicted a GDP growth of 3% during the year. The International Monetary Fund had projected a GDP rate of 2.5%.
He anchored this prediction based on the expectations of full implementation of the recent policies introduced by the Central Bank. He did not avail us of the list of the policies. But they are not far to seek. They are all mainly policies aimed at kick-starting the economy from COVID-induced Lockdown. And they are a hand full. It might be in order for us to quickly run through some of these policies.
The policies include the extension of the moratorium on the repayments; principal and interests on intervention funds extended by the CBN, the reduction in interest rates from 9 to 5% over the stipulated duration, the 50 billion Naira targeted facility through NIRSAL Microfinance Bank for households and MSMEs, support for the health care industry including the special facility to acquire the capacity for the local production of vaccines, regulatory forbearance for Deposit Money Banks to restructure their credit portfolio as well as the pursuit of Loan/Deposit ratios target policy to encourage banks to be a lot more aggressive in extending credit to their customers. There is no doubt that these gamuts of policy measures would be impactful in driving growth if fidelity is shown with implementation.
If we also factor in the expectations with regard to reductions in the rate of insecurity which should impact the supply chain from the farms. We should expect that the trend we have witnessed so far with reductions in the inflation rate which commenced at about the end of the first quarter of 2021 would make us all optimistic that we are able to achieve the much-desired lowered rate of inflation.
But the spanner in the works would come from the recent clamour by Governors for fuel price to be jerked up by over 100%; from the current rate of 168 to 380 Naira per litre. We don’t expect the Fiscal Authorities fully mindful of the destabilizing consequences of such a move to concede to it. The Federal Government has assured that it is not contemplating any more Lockdown as a result of the effect of the Delta variant of COVID in its devastating consequences. This stance is helpful as any further Lockdown would lead to devastating reverses.
If we bring to mind that this country has not attained the much desired single-digit inflation in the last four years, it helps us moderate our expectations in this respect. But there is nothing wrong with being cautiously upbeat for a change about our circumstances. It is good psychology for our spirit.