Expert gives reason for devaluation of Naira - Flavourway


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Tuesday, November 22, 2022

Expert gives reason for devaluation of Naira

 A Financial expert, Mr Idakolo Gbolade, said the increased Money Supply, otherwise known as M2, is the reason for the continued fall of the Naira.

In perspective, the money supply refers to all the currency and other liquid instruments in a country’s economy on the date measured.

According to data from the Central Bank of Nigeria, CBN, the amount of the money supply in October alone stood at N50.5 trillion.

The country’s money supply has risen by N6.1 trillion this year alone, closing at N44.4 trillion at the end of 2021. This is coming when most Nigerians have struggled with economic misery, rising inflation and insecurity.

Reacting to the development, Gbolade stated that an increased M2 in the country should have stimulated economic prosperity; however, the contrary is the case.

He explained that lower interest rates and productivity growth are expected to match an increased money supply to avoid soaring inflation. Still, the current monetary policy by the federal government has hindered a positive trend.

Gbolade added that the government needs to rejig its monetary policy framework to address Nigeria’s economic challenges.

“Increased money supply must be matched with commensurate growth in productivity to avoid increasing inflation.

“The constant increase in money supply has aided the continuous devaluation of the Naira and increased inflationary trends.

“An increase in money supply is expected to lower interest rates, generate more investment and increase consumer spending.

“It is also expected to aid more importation of raw materials and increase production, which will increase employment.

However, the government’s monetary policy framework has yet to allow all these expectations to come true.

“It is high time the policy drivers of the economy in Nigeria looked critically at policy implementation to achieve the desired result,” he stated.

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