Reduce monetary instruments to boost economy expert advises cbn

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Expert advises CBN to reduce monetary instruments to boost economy

A renowned economist, Prof. Chukwuma Soludo, has advised the Central Bank of Nigeria (CBN) to reduce the number of monetary instruments in the economy to boost economic growth. Soludo, a former Governor of the CBN, made this suggestion while speaking at a webinar organized by the Nigerian Economic Summit Group (NESG).

According to Soludo, the current monetary policy framework in Nigeria is too complex, with multiple instruments that can lead to confusion and inefficiencies. He argued that reducing the number of instruments would simplify the system, making it easier for policymakers to make informed decisions.

Soludo specifically suggested that the CBN should reduce the number of monetary policy rates, including the Monetary Policy Rate (MPR), the Cash Reserve Requirement (CRR), and the Liquidity Ratio (LR). He also recommended that the CBN should focus on a single policy rate, such as the MPR, to guide monetary policy decisions.

The expert also emphasized the need for the CBN to adopt a more flexible monetary policy framework, which would allow for more effective management of inflation and economic growth. He argued that a flexible framework would enable the CBN to respond more quickly to changes in the economy and maintain price stability.

Soludo's advice comes at a time when the Nigerian economy is facing significant challenges, including high inflation, a widening trade deficit, and a decline in foreign exchange reserves. The CBN has been using various monetary instruments to manage these challenges, including increasing interest rates and imposing restrictions on foreign exchange transactions.

Overall, Soludo's suggestion highlights the need for the CBN to simplify its monetary policy framework and adopt a more effective approach to managing the economy.