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Make clear policy decisions to control inflation, IMF tells Nigeria

The International Monetary Fund (IMF) has advised Nigeria and other countries to make clear policy decisions for price stability amid rising inflationary pressures.

The Bretton Wood institution said Nigeria’s inflation rate would moderate to 19 percent this year and drop to 17 percent in 2023, reflecting on the monetary policy actions of the Central Bank of Nigeria (CBN).

The institution said this on Tuesday at its headquarters in Washington while unveiling the October 2022 Global Financial Stability report, “Financial Stability in the New High-Inflation Environment”.

The IMF said central banks need to act resolutely to bring inflation back to target and avoid a de-anchoring of inflation expectations, which would damage their credibility.

It added that the global economic outlook had deteriorated materially since the April 2022 Global Financial Stability Report (GFSR).

“A number of downside risks have crystallised, including higher-than-anticipated inflationary pressures, a worse-than-expected slowdown in China on the back of COVID-19 outbreaks and lockdowns, and additional spillovers from Russia’s invasion of Ukraine. As a result, the slowdown of the global economy has intensified,” the report said.

In Nigeria, the consumer price index (CPI), which measures the rate of change in prices of goods and services, surged to 20.52 percent in August 2022 — the highest since October 2005.

At the last policy-setting meeting, Godwin Emefiele, governor of the apex bank, said the monetary policy committee (MPC) would continue “to aggressively hike rates to fight the upward reign of inflation”.

“Clear communication about policy decisions, commitment to price stability, and the need for further tightening will be crucial to preserve credibility and avoid market volatility,” IMF added.

“Exchange rate flexibility helps countries adjust to the differential pace of monetary policy tightening across countries. In cases where exchange rate movements impede the central bank’s monetary transmission mechanism and/or generate broader financial stability risks, foreign exchange intervention can be deployed. Such interventions should be part of an integrated approach to addressing vulnerabilities as laid out in the IMF’s Integrated Policy Framework.

Emerging and frontier markets should reduce debt risk through early engagement with creditors, multilateral cooperation, and international support. For those in distress, bilateral and private sector creditors should coordinate on preemptive restructuring to avoid costly defaults and prolonged loss of market access. Where applicable, the group of Twenty Common Framework should be used.”

Despite facing an unusual challenging financial stability environment, IMF advised Nigeria and other nations to strike a “balance between containing these potential threats and avoiding a disorderly tightening of financial conditions”.


Speaking at a press conference, Pierre-Olivier Gourinchas, economic counsellor and the director of research of the IMF, said the rapid rise in prices, especially for food, is causing big issues for global economies, including Nigeria.

With this development, Gourinchas said central banks can deploy the non-conventional policy to chart a course for monetary policy.

“Well, our advice, in general, is that central banks should first off with traditional instruments of monetary policy and as you want to think about non-conventional instruments then you should think about what friction that is preventing the conventional monetary policy from working would require a country or a central bank to deploy alternative ways of, of charting a course for monetary policy,” he said.

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