Inflation-targeting monetary policy framework in Nigeria

Abstract

Many developing countries are facing high inflation, and the central banks in these countries have adopted several solutions to tame rising inflation. Nigeria transitioned to an inflation targeting monetary policy framework in late 2023 from a monetary targeting monetary policy framework. There is high prospect that the inflation targeting monetary policy framework will tame high inflation in Nigeria. This study identifies the important success factors for an effective inflation targeting monetary policy framework in Nigeria. The identified success factors include the size of economic agents monitoring the inflation target, the credibility of the central bank, the degree of central bank independence, reduction in budget deficit, limited dollarization of the Nigerian economy, effective central bank communication, avoidance of fiscal dominance, financial development, greater financial inclusion, financial stability, and insecurity caused by farmer-herder clashes and terrorism.