‘N1,000 in 2019 now N730’: Rewane offers solutions to Nigeria’s inflation crisis
Nigeria needs to stimulate economic growth and reduce money supply, among other measures, in order to tackle the high inflation rate in the country, a renowned economist, Mr Bismarck Rewane, has said.
Rewane, who is the managing director/chief executive officer of Lagos-based Financial Derivatives Company Limited, said inflation rate would continue to rise.
Describing inflation as a thief of value, he said, “N1,000 under your mattress in Jan 2019 now equals N730 – down 28 percent in two years. $1,000 under your mattress in New York is now worth $997 – down 0.3 percent in two years. GH₵1,000 under your mattress is now worth GH₵ 821 – down 18 per cent in two years.”
“Inflation is increasing as money supply climbs. Money supply is not the only cause,” he said in a new report.
According to Rewane, other factors are devaluation effect, logistics and distribution costs (petrol price hike), ways and means advances, supply chain disruptions, insecurity and Boko Haram.
He said inflation rate would increase to about 16 percent in January from 15.75 percent in December.
Rewane stressed the need to reduce foreign exchange rationing, increase trade flows and reduce the negative rate of return in the country.
According to him, sectors that can help in addressing the high inflation rate are agriculture, manufacturing, petroleum and trade.
He said, “Inflation will continue to rise. Inflation would moderate in the third quarter of 2021.
“Currency pressures to remain and adoption of exchange rate flexibility is expected – N478/$. CBN to likely adopt a tightening policy stance in Q2’21 – MPR 12.5 percent.
“Oil production to increase slightly (1.6mbpd) as OPEC relaxes its production quota 1.6mbpd. Oil price to trade $50pb-$55pb in the near term.”
According to him, when interest rates are higher than inflation rate, currencies are more stable and national savings rates increase.
He noted that South Africa reported a 16-year record low inflation (3.1 percent) in Dec. 2020.
