Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has revealed that the bank will not fund more intervention programmes.
He made this known while speaking during plenary at the Senate on Friday.
According to him, the CBN does not have the capacity to go on with the over N10 trillion quasi-fiscal measures which were disguised as “intervention programs” over the years.
The CBN in December 2023, announced suspension of new applications for the intervention loans. The International Monetary Fund (IMF) had previously advised the CBN to discontinue the programmes, prominent among which is the Anchor Borrowers Programme (ABP).
Cardoso said the excess liquidity in the economy had caused distortionary effects, resulting in the uptick in core inflation and food inflation respectively.
“On our side at the CBN, we have responded with significant monetary policy tightening to rein in inflationary pressures. Empirical analysis has established that money supply is one of the factors fuelling the current inflationary pressure. For example, an analysis of the trend of money supply spanning over nine months shows that M3 increased from N52 trillion in January 2023 to 68.2 trillion in November 2023, representing a 31% increase over the period.
“We have also halted quasi-fiscal measures totalling over N10 trillion at the CBN previously disguised as development finance interventions. These measures have contributed to an increase in money supply, raising prices to the level of inflation we are grappling with today.
“On the issue of development finance, we Re coming to terms with a large amount of liquidity that was pumped into the system that created a lot of distortions and a lot of it didn’t get to what it was designed to get to.
“All we are saying as the central bank is that we cannot engage in interventions.”
The CBN governor said the bank would partner with other ministries on the fiscal side to promote efficient and strategic programmes, while it will serve as an intermediate mechanism for those who can provide financing for intervention programmes to help curb rising food inflation in the country.
“We will work closely with those that have that ability and help them to create capacity and to be a conveying mechanism for those that have that capacity to do it.
“So, it will be a partnership as opposed to a situation where we get involved in it directly. And as I say, run the risk of failed interventions which are typically inflationary.
“The CBN adoption of inflation-targeting framework involves clear communication and clarification with fiscal authorities to achieve stability, potentially leading to lower policy rate and creating job opportunities,” he added.
