Naira Scarcity: Govt’s Attempt to Manage Inflation – Falae

An elder statesman and former minister of Finance, Budget, and National Planning, Olu Falae, on Thursday, disclosed that the cash crunch in some parts of the country is a Federal Government’s ploy to contain inflation in Nigeria.

Inflation in the country has skyrocketed, reaching more than 27 percent over the past year, and worsened with the removal of fuel subsidy and floating of the naira.

It would be recalled that there was a crash crunch in the country late last year to the early part of 2023 due to the redesign of the naira.

But Falae while featuring on Channels Television’s Politics Today, said the current scarcity of banknotes in some parts of Nigeria is a calculated attempt by the government to tackle inflation.

He said, “I suspect that the scarcity of naira – which everybody feels including myself – is an attempt by the government and the Central Bank to manage inflation. If that is so, then I am afraid, they have to think again because you see, the high level of price inflation is not being caused essentially by excess liquidity.

“It is not what we call in economic parlance a demand-pull inflation that we have. It is a cost-push inflation. The cost of imports of raw materials, machinery, and spare parts. The increased cost of those items is what is causing the inflation we are facing today.

“So, trying to mop up liquidity in my view is not the right thing to do. There may be other reasons for making the naira scarce. But surely, the reason should not be an attempt to manage what is essentially cost-pull inflation through what I call a traditional solution to demand-pull inflation.”