Economists have said the constraint demand caused by cash swaps and other policies of the Central Bank of Nigeria may push down inflation in January.
They noted that currency redesign and cashless policies enforced by the apex bank may not have a long-term effect on curbing the inflation rate in the country.
In a chat with The PUNCH, a professor of Economics at Babcock University and former President of the Chartered Institute of Bankers of Nigeria, Segun Ajibola, said the pressure on the people may reduce their demand and temporarily stifle the inflation rate.
He, however, warned that the effect may be temporary until the real problems were solved.
He said, “There is what we called demand-pull inflation. There is a cost-push. Cost-push comes from producers, manufacturers, and other owners of means of production that deal and sell to the market like farmers.”
He said people had been largely constrained, making them unable to meet demand, owing to the pressure and the circumstances cash swaps may reduce demand power.
Ajibola added, “People naturally should have made a demand of some things. It is an involuntary reduction in the volume of demand
“The pressure on the consumers is so intense that there may likely be a significant effect on the inflation rate. If this happens, it will be temporary. Because by the time the economy recovers from the shock of these CBN policies, then we will be back to the reality of our economy.”
Another professor of economics at the Lagos Business School, Bongo Adi, noted that the government had pushed Nigerians hard so much that there was a cut in spending, forcing down aggregate demand in January.
He said, “Although the inflation rate has come down in places like the US, not necessarily because of this hawkish monetary policy stance.
“It is because of the consumer spending that has not reached the elastic limit. The consumers have been pushed to the last straw of the ladder so there is nowhere to go other than to cut down spending.
“With the cutting down spending, aggregate demand begins to fall. As demands fall, prices begin to come down. This is not because of a limited money supply but because people cannot spend what they don’t have.
“This is January; I will expect inflation to begin to go down because people don’t spend a lot of money this month.
“When it comes down this month, it will not be because of the CBN’s monetary policy but because of reduced demand.”
He noted that the inflation rate will be around 250 per cent considering the price of consumer goods that have almost broken through the roof, noting that the hike in interest rate may not be enough and a viable solution to curbing the inflation rate in the country.
