*Wonder whether Inflation, Exchange Rate KPIs For Cardoso
President Tinubu’s projection of 15 percent inflation and N150/$ exchange rate in the 2025 budget proposal seem not to have gone down well with some analysts as they say they are unrealistic and not in tune with current economic realities.
Infact, the analysts see some of the projections as mere Key Performance Indicators (PPIs) which are not achievable, but, may be considered at the end of the budget cycle as Work-in- Progress (WIP)
They argue that bringing down inflation, currently at 34.6 percent as at November, sounds unrealistic and too ambitious, considering the fact that the supporting fundamentals or indicators are lacking.
Similarly, projecting exchange rate at what the regards as an ‘unacceptable’ rate means admittance of failure and hopelessness.
In his presentation to a joint session of the National Assembly on Wednesday, President Tinubu said the budget aims to bring down inflation from its current 34.6 per cent to 15 per cent next year.
The president also listed highlights of the N49.7 trillion budget to include defence and security – N4.91tn, infrastructure – N4.06tn, health – N2.4tn, and education – N3.5tn, among others.
But speaking on Channels Television’s Politics Today hours after Tinubu’s budget presentation, Policy Analyst, Basil Abia, says the projections of the 2025 budget proposal are unrealistic.
Abia said it is impossible to reduce inflation to 15 per cent next year when crude oil production is below two million barrels per day.
“The projections are not realistic and the most important thing I think Nigerians should understand is what are the assumptions driving those projections. Now, if you say you want to do 15 per cent headline inflation rate on aggregate for 2025, the core drivers, you have to be able to show us that you are going to realistically drop down those drivers, reduce their efficacy, and their frequency.
“Unfortunately, you cannot do 15 per cent headline inflation rate when you are producing less than two million barrels per day. Now, I know they are projecting two million barrels per day, but it is impossible to do when you are currently producing 1.5 million barrels per day,” Abia said.
‘Dampening Hope Of Exchange Rate Reduction’
The President also said that the exchange rate will improve from approximately N1,700 per dollar to N1,500.
However, the Director General of the Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu, who also appeared on the programme, berated the President for giving the impression that he could not bring the exchange rate lower than N1,500.
“If you look at the projections made, first of all, I started getting worried when I saw that the exchange rate was projected at N1,500. That exchange rate is to tell Nigerians that there is nothing we plan to do that will bring the exchange rate lower because Nigerians are still thinking that probably that rate can still come lower than N1,500, maybe N1,000.
“There is a problem with that projection because you are dampening our hope of a reduction in the exchange rate. All you are telling us is, ‘Yes, the exchange rate is meant to remain here,” Ekechukwu said.
Another analyst who pleaded for anonymity said with the continuing onslaught of terrorists and herders who have completely prevented farmers from accessing their farmlands, particularly in the Northern part of the country as well as the negative impact of the climate change, farm produce will be adversely affected that it might be difficult to expect prices of food stuffs to come down, for the projected inflation rate to be achieved.
ALSO READ:Amid Intermittent Grid Collapses, FG’s Electricity Subsidies Rise To N199.64bn In December -NERC
Speaking further, he said Nigerians are at a loss as to whether, in arriving at the projected inflation rate, the Central Bank, (CBN) was involved, he was setting performance indicators for the CBN Governor or better still, mere reference indicators?.
CBN’s Journey So Far With Inflation Management:
From the 6-9% inflation proposal by the CBN in the past, regarded as single-digit inflation target or band, being part of its monetary policy framework aimed to achieve price stability and control inflation, the story has been that of a ‘broken record ‘ according to the analysts.
This is because the single-digit inflation target was in place for several years, but it was not always achieved,a development that resulted in the country struggling with high inflation rates, despite implementation of various monetary policy measures to combat it, among which are interest rate hikes and foreign exchange interventions.
CBN’s Inflation Targeting Framework
The banking sector regulator had adopted an inflation targeting framework to achieve price stability and control inflation, but the situations seem to be getting worse by the months.
Determined to make a difference, Yemi Cardoso, the current CBN Governor, in his famous declaration at the Bankers’ Dinner in 2023, announced the 21.4% inflation target for 2024.
Cardoso at one of the Monetary Policy Committee meetings told his audience that CBN is transitioning to inflation targeting framework.
In this context, the analysts thought that with the demonstrated zeal and determination, Cardoso’s 21.4% target might be a stepping stone towards achieving a lower, long-term inflation target, possibly achieving the 6-9 percent band by the previous Governors.
With the year 2024 gradually coming to an end and even within the year, food inflation rate was closer to 50 percent, the analysts say relying solely on monetary policy measures, particularly rate (MPR) hikes for the achievement of the desired inclusive growth, without structural reforms, will, at best, remain political rhetorics and yearly rituals.
