Inflation: Nigeria heading to direction of Zimbabwe, Venezuela – Adebajo warns

Adetilewa Adebajo, Chief Executive Officer of CFG Advisory, says Nigeria risks going in the direction of Zimbabwe and Venezuela if inflation is not curtailed.

Adebajo emphasized the importance of addressing inflation, stressing that the current economic management in the country is very critical.

He made this known on Wednesday while fielding questions on Arise Television’s Morning Show program.

While answering questions on the implications of the Central Bank of Nigeria’s (CBN) new interest rate on small businesses, Adebajo said it is necessary to increase the interest rate in the short term.

He said: “Let me explain it to you in purely practical terms. We want to buy things, and suddenly we cannot stretch our Naira. The same Naira that used to buy one bag of garri cannot buy it now. I think I am an exponent of the ‘sachet economy.’

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“We have become a sachet economy; even alcohol is now being sold in sachets in Nigeria. That is because we can no longer stretch our Naira. So every Naira we get, we can’t buy as much garri as we used to before.

“So, what are we going to do to ensure that the one Naira we have can buy more garri for us? If inflation continues to rise, one Naira can’t buy more garri for you. The way we can reduce inflation to get your one Naira to buy more garri for you is to increase the interest rate in the short term. And I told you, don’t get me wrong, in 2011 we have done it before.

“It’s not rocket science; it’s something that has happened in Nigeria before. It didn’t happen in another country. Check 2011 and 2014, inflation rate was 9 to 11 percent, interest rate was at an optimal rate of 10 to 13 percent or thereabouts. So what we are saying is let’s get our economy back to that period.

“Productivity issues will come into play, but if you don’t control inflation, your productivity will continue to be nonexistent. And if you don’t control the inflation, do you know the direction we are going? We are going in the direction of Zimbabwe and Venezuela.

“That is the flip side of that; you now have hyperinflation because you don’t want to face the reality of it. It’s important that we look at inflation because the economic management in this country today is very critical. And that is why this Dangote refinery issue is a distraction. The success of that very project can help to reduce inflation.”