The Central Bank of Nigeria may need to sterilise foreign exchange inflows arising from higher oil prices to keep inflation in check, the International Monetary Fund has said.
Premium Times reported that the IMF issued the advisory in the latest Article IV consultation report on Nigeria, noting that while rising crude prices could boost FX inflows into the country, the increased money supply could drive inflation higher.
Sterilisation is a monetary policy tool that allows a central bank to absorb excess liquidity from the financial system. In this case, the IMF warned that without such measures, the additional naira liquidity created by oil revenue inflows could undermine efforts to bring down inflation.
The recommendation comes as global crude prices have risen following renewed tensions in the Middle East. Nigeria, an oil-dependent economy, typically benefits from higher oil revenues, but the IMF cautioned that the inflows must be managed carefully.
The report provides a more specific monetary policy angle to the IMF’s broader assessment of Nigeria’s reforms. The Fund has previously urged the CBN to maintain tight policy to support disinflation.
Sources: Premium Times
Something we should clarify?
Contact the newsroom
