The Dynamic Post COVID-19 World and Inflation: is Nigeria’s Monetary Policy Effective?

Abstract

Nigeria had relative success in tackling the Covid-19 and its attendant economic consequences. A complementary mix of superior monetary and fiscal policy interventions saw support for the real sector, as well as growth and strengthening for the financial sector. The monetary authorities used several mediums to inject funds into the economy, while the financial sector was the channel through which huge sums were injected into the economy. These interventions however came with their fair share of woes, as they were carried out against the backdrop of rising inflation and unemployment levels. The unique nature of the Nigerian economy saw policy interventions targeted at stabilizing the economy, yield less than satisfactory outcomes. Currently, Nigeria faces the lagged impact of monetary and fiscal Covid-19 interventions in persistent high double digit inflation rates. The fall in global oil supply and world food prices necessitated by the Ukraine-Russian war have not helped the situation. These global events have had far reaching impacts on the Nigeria economy via the shortfall in supply of Premium Motor Spirit (PMS) products, food shortages, and resultant exchange rate pressures. The domestic economy has not been without its fair share of events that have resulted in a spike in inflation rates. The persistent security issues in the north and other parts of Nigeria, did not serve as an obstacle to people mobilization and the high spending during the 2023 elections. Declining government revenues, the rising public debt and its servicing, while inimical in their own stead, have catalyzed the pressure on the exchange rate. Against these backdrop, the monetary authority’s decision to institute a currency redesign and cashless policy has left people confused as to what actually is their short- and long-term goals/objectives, the effectiveness of policy to achieve said goals, as well as their readiness to tailor policy to changing global events/trends. The study will seek to examine monetary authority responses to curb inflation and achieve economic stability.