'Too much lending' - Ex-CBN deputy Moghalu blames Emefiele's CBN for Nigeria's high inflation

Former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has revealed that the continuous financing of the federal government's deficits via the Ways and Means led to Nigeria's high inflation.

Moghalu disclosed this during an interview on Arise TV on Thursday, June 22, 2023.

Senate increases Ways and Means lending limit to FG

TheCable reports that as of last year, the Nigerian government has borrowed about N6.3 trillion from the CBN in the first 10 months through the Ways and Means Advances.

In May 2023, the Senate approved about N22.7 trillion CBN loan spent by the executive.

Ways and Means Advances is the apex bank's loan facility to finance government deficits.

The Senate amended the CBN Act in May 2023 to increase the Nigerian government's Ways and Means borrowing limit from 5% to 15%.

Moghalu revealed that the inflationary impact is the primary immediate threat during petrol subsidy removal and naira float.

Moghalu said: "So, inflation in Nigeria will continue to shoot up in the immediate time; that is a fact."

"This becomes a challenge because to attract capital, when you have a very stiff rise in inflation, most times you need to keep interest rates high for a while, but Nigeria's economy is very funny; it doesn't always follow the textbooks."

According to Moghalu, there are many reasons for the surge in inflation despite high-interest rates.

The ex-CBN top shot said what is causing the current round of inflation is not the usual definition of too much money chasing few goods only but that there is a cost-push factor.

He said: "Also, the central bank itself was contributing to inflation through the monetary phenomenon of illegal financing of the federal government's massive deficits to N23 trillion, in ways and means lending."

"Of course, you're contributing to inflation with one hand. You say you're fighting inflation with the other hand. Why were the ways and means of lending so high?

Moghalu advocates CBN's independence

The former presidential candidate said the CBN needs to be independent and free from government control to manage inflation effectively. "That's why we talk about central bank independence because it is necessary to checkmate what we call the time inconsistency problem," Moghalu said.