The World Bank has identified five macroeconomic policy missteps taken by Nigeria between 2015 and 2023 that pushed Nigeria’s economy down to its knees, thus escalating inflation to a 28-year high.
The World Bank in its latest edition of the Nigeria Development Update (NDU), explained that prior to 2015, Nigeria had a single-digit inflation rate, which was in the same range as many other emerging economies.
However, along the line, the Bank said, some macroeconomic missteps which included Ways and Means financing of fiscal deficits by the Central Bank of Nigeria (CBN), granting of large credits at subsidised rates to households and businesses by Nigeria’s apex bank, banning of access to foreign exchange for importation of over 900 products, cost of maintaining an overvalued exchange rate and unbudgeted fiscal deficits were introduced by the Muhammed Buhari led Federal government.
The report stated that from 2015, the CBN shifted its primary focus away from price stability, which, of course, was its core mandate, to growth objectives, by providing large amounts of credit to households and firms at subsidized rates, as well as prohibiting access to foreign exchange to import over 900 product lines.
The World Bank said the CBN also accommodated large and unbudgeted fiscal deficits, as well as the costs associated with maintaining an overvalued exchange rate, and increasingly subjugated monetary policy to financing fiscal deficits, including deficit monetization through Ways and Means Advances.
These misteps said the global lender, resulted in large cash in circulation which weakened confidence in the Naira and contributed to the spike in inflation even before the reforms in the foreign exchange and energy sector began.
The Bank noted that Nigeria’s inflation peaked at a 28-year high of 24.19% in June 2024, marking 19 months of consistent increase.
Following the astronomical rise in inflation rate is the hike in general cost of goods and services across the country.