Nigeria has since 2014 seen a raising prices of goods in the market, through 2016 till date, inflation have been on the increase and government and central bank have been almost clueless on the solution.
Recently the Minister of Finance to president Bola Tinubu, Mr Wale Edun have suggested a contractionary monetary policy by cutting down money supply into the economics. Although there have been debates as to if this policy is best for the economy.

My Opinion

Cutting off money supply into the economy looks like an effort only in theory, put it is still a nice approach to reduce inflation, although not the ultimate. Now let's see what inflation is.

According to both the monetarist and Keynesians Inflation is the continuous increase in price of goods as a result of too much money in circulation, WITHOUT A CORRESPONDING INCREASE IN THE PRODUCTION OF GOODS IN THE ECONOMY.

You will see that I used caps letter for the last sentence, that is one place Nigeria is getting it all wrong. Need I add why the naira is having a free fall. What policy should the government of Nigeria pursue? In my opinion.

1. Import substitution strategy: Here government must prioritize investment in manufacturing sector, provide credit to manufacturers, boost confidence of foreign investors.
The goal is to produce locally those things we import, as we also import inflation while importing. This strategy makes more goods available to match the already increase in money supply that causes inflation.

2. Managing the FX market: But how do you successfully manage the FX market when your naira is at the mercy of the dollar? Import substitution strategy also comes in. When we produce more in Nigeria (including petrol), there will be less pressure on the naira to chase dollar, then naira stabilizes. I had NNPCL got a 3bn dollars loan to stabilize naira, and I ask, how will they do that.

3. Religiously fight corruption: If we keep implementing nice polices with corruption still in place, these policies are going to end up as paper policies. How about distributing grants and loans to manufacturers and it ends up in the bank accounts of senators as a token, or to a particular greedy manufacturers alone? Then the policy becomes a textbook policy.

3. Massive investment in agricultural sector: You will agree with me that most inflation in Nigeria today are food inflation, and, of course this food inflation was as a result of demand push inflation, cost of farming inputs went as high as 200 percent.
Government must find a way to encourage local producers of farm inputs through supervised credits, provide cheap irrigation facilities to farmers and food inflation will reduce, just like what happened with rice around April 2023.
Rice produced via irrigation reduced the price of the commodity for some months.

Fix back the naira: This point came as a surprise but how do you float your currency when you are operating a mono-economy. Nigeria depends on oil and gas for over 90 percent of her revenue, so at this rate, what every happens to the naira at the international market, equally affects the citizens, just like the continuous increase in fuel price.
If we must float the naira to the dollar, then we must export more than just oil and gas.

In all of this, government must prioritize key sectors like manufacturing, power and agriculture while supporting SMEs to increase
GDP and bring down inflation.

Every implemented policy was once a theory. Good day.

These are practical ways of tackling inflation especially demand-pull and cost-push inflations if effectively implemented not those policies they are suggesting.
They are just looking for a way to syphon money hence worsening the situation. Imagine going to borrow money to stabilize the Naira? Unless you are going to pump that money to production industries especially those that produce substituted products and Heavy agricultural sector, you are not truthful to yourself. Unless this is what they want to do with the money, that money will be wasted and the problem will continue. Moreso, if it's what they want to do, that money is too small to contain that, it should be something more than 3 trillion considering the nation's economics

Yeah! Keep the forex indices under strict check and Balance out the trade deficits. Encourage the SMEs to thrive.

the easiest way to gain back value of Naira is for Nigerians to do good businesses abroad nd then supply FX into the economy....

or u simply leave the dollar alone nd focus on the supply of Naira...naira supply relative to FX will bring FX prices lower

You are very correct but while policies will be put in place to encourage productivity locally, which impact may not be immediate, the proposed policy of the FG I believe is aim at immediate solution against the ever rising inflationary trend

When did the Ministry of Finance start managing monetary policy, in addition to fiscal policy? Did someone delete the CBN?

The only solution to fix our dying economy is to fix power supply, with steady power supply local and international companies will build more factories here, for instance Nigeria we like importing from China, Chinese and other Asian companies can set up industries here most things we import we can buy from here, the sad thing is that Nigeria has abundant of these materials here.

If I understand you well, cutting money supply is a right step but not the ultimate solution, Right now, as it is the ultimate steps seems not an easy ride, we like it or not.
1) there are saboteurs of the government who are trying all they could to hinder local production and all other ultimate steps as you stated
2) The ultimate steps takes time
3) cutting money supply won't hinder the ultimate step will only ease it.
So I will go for cutting money supply, it's a nice move at the wrong time (should've been done years back)

cdqyehyeh:
If I understand you well, cutting money supply is a right step but not the ultimate solution, Right now, as it is the ultimate steps seems not an easy ride, we like it or not.
1) there are saboteurs of the government who are trying all they could to hinder local production and all other ultimate steps as you stated
2) The ultimate steps takes time
3) cutting money supply won't hinder the ultimate step will only ease it.
So I will go for cutting money supply, it's a nice move at the wrong time (should've been done years back)

You want to build a 300 bedroom house that will accommodate your extended family, but it will take time, do you dump your plans because it will take time?

Cutting down money supply is OK, but should also accompanied with these other steps.

Phonon:
When did the Ministry of Finance start managing monetary policy, in addition to fiscal policy? Did someone delete the CBN?

He is the coordinating minister of the economy... Although he and the CBN governor should be working hand in hand.

yemex04:
You are very correct but while policies will be put in place to encourage productivity locally, which impact may not be immediate, the proposed policy of the FG I believe is aim at immediate solution against the ever rising inflationary trend

Good policy, cut in money supply is OK, while that is done, other measures should be put in place.

What of government sharing the dollars denomination obtain from oil sales to States for for them to source for Naira and that will make nsira a bit scarce when all of them are looking for naira up and down every month but C BN converting dollars to naira does not create scarcity of naira. My two kobo

Yes he can coordinate all aspects of the economy (trade, investments, government spending etc) and he can have his *opinions* on monetary policies. However, if the CBN is not a department under the Ministry of Finance , then the Minister should allow the CBN Governor do his job without interference.

Saintinoo:


He is the coordinating minister of the economy... Although he and the CBN governor should be working hand in hand.