“We have reduced inflation…”. Really?

First of all, I’m not a hater. But I do get irked by something. One of which is the narrative that keeps getting repeated on inflation by the monetary authorities. Paraphrasing: “through concerted efforts of monetary policy we have reduced inflation from 18% to 11%”. Any time I hear that line I think 🤷🏿‍♂️. It’s almost like we have collective amnesia or something.

This is what inflation has looked like over the last decade.

So technically it is true that inflation dropped from 18 percent to 11 percent but that is not the story of inflation over the last five years. The story of inflation over the past five years is that it has been slowly trending upwards. You can see it clearly in the graph above if you ignore the pimple like bump which is largely the result of the foreign exchange crisis. The monetary policy framework, even before the FX crisis began was not completely focused on inflation and the same framework has remained after the FX crisis. The outcome is that inflation continues to trend upwards.

This is not to say that the FX crisis had no effects but those were mostly just the pimple on the graph. The FX crisis was like a shock to inflation and the shock came and went.

Or if you want to see it a bit more clearly…..

So what exactly is wrong with the monetary framework? In general the CBN seems to be distracted by all its other self inflicted “objectives”. As can clear be seen in the governors five-year policy plan released on Monday, the CBN is going to continue its development agenda. Which in plain English means trying to use monetary policy for other objectives besides managing inflation. Theoretically, we know that typically means higher inflation. You can kind of see this in the evolution of money supply over the last decade.

Judging by the increase volatility in changes in M2 its easy to see that stability is not really on the agenda. Like I said in the beginning, I’m not a hater. But I do worry what happens if the CBN continues to not be focused on inflation. The costs from higher inflation is typically larger than any supposed benefits from all its interventions. My advice would be for the CBN to go back to its roots and focus on its core mandate.

Economist, African, and some other things | Director at @TurgotCentre | Monthly Nigeria Economic Update at

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