The ongoing economic challenges in Nigeria are largely driven by inflationary pressures, with exchange rate stability yet to be achieved, according to Muktar Mohammed, CEO of Finance with Muktar.
In an interview with ARISE NEWS on Wednesday, Mohammed highlighted that the conventional, “textbook” approaches to managing inflation have proven ineffective in Nigeria. He explained that inflation, largely driven by supply distortions and liquidity issues, is further exacerbated by high production costs in rural areas. Moreover, the liquidity challenge within the economy continues to fuel the inflationary spiral.
“Textbook economy has not worked in Nigeria, and it will not work,” Mohammed stated. He pointed out that Nigeria’s inflationary pressure stems from a combination of factors, including the cost of production, unstable exchange rates, and microeconomic policies.
The CEO criticised the current management of the CBN, accusing it of merely addressing surface-level issues while ignoring deeper, structural problems. One key issue, he argued, is the volatility of the exchange rate, which remains Nigeria’s central economic challenge.
“80% of what we consume, we import,” Mohammed said. “Even if we are not importing, the machinery we use to convert them, we import them.”
He noted that these economic challenges cannot be addressed with “one tool,” adding that the solution requires more than policy changes.
Furthermore, he stated that the focus on liquidity challenges extends beyond the broader economy, reaching the retail foreign exchange market. Mohammed explained that the real problem lies not in the autonomous foreign exchange market but in the retail space, where demand remains unmet. The absence of Bureau De Change (BDC) participation further compounds this issue, he argued.
Mohammed questioned the effectiveness of recent policies aimed at stabilising the exchange rate. While the announcement that Dangote and the Nigerian National Petroleum Corporation (NNPC) would help ease exchange rate pressure generated initial optimism, he said that there has been no clear follow-up, and the proposed plan of the government to sell crude to Dangote’s refinery at a fixed exchange rate has not yet yielded results, as the exchange rate remains unspecified.
The CEO said that the policy did not have the fundamentals to stand on its own.
The need for a stable exchange rate is clear, Mohammed stressed, before any real value can be arrived at. Stability, he explained, will help regulate demand and supply. However, the current situation is far from stable.
“We have not maintained stability. We have maintained a corridor. There is a difference between stability and a corridor of stability,” he said.
Mohammed’s statements come in the wake of the Central Bank’s recent monetary policy decision, which saw the Monetary Policy Rate (MPR) raised to 27.5% in an attempt to curb inflation. The CBN also retained the Liquidity Ratio (LR) at 30% and the Asymmetric Corridor at +500/-100 basis points around the MPR. Despite these measures, however, the broader challenge of exchange rate instability and inflation control remains unresolved.
Frances Ibiefo
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