Restoring the naira as a store of value, By Uddin Ifeanyi
If the naira is only as strong as Nigeria’s balance sheet, then the task of getting both the fiscal and monetary authorities to operate under a common nominal inflation anchor must begin with reducing recurrent expenditure, broadening the tax base instead of increasing the tax rate, returning off-budget borrowing back to the budget, publishing complete fiscal accounts, improving the quality of public investment, establishing a credible medium-term strategy, and ceasing to use the CBN as a piggy bank.
Ideally, however, the CBN’s policy rate should transmit price signals through the financial system, influencing saving, borrowing, liquidity, inflation expectations, and in the end, the naira’s exchange rate.
Yet, we have had years in which the MPR stoically remained unchanged even as inflation ran riot, and the naira’s exchange rate came under severe downward pressure.
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