Inflation Targeting Framework for Monetary Policy in Nigeria: Issues, Problems And Prospects.

Abstract

Over the years, Nigeria has adopted different monetary policy regimes with limited or no success. These ranged from exchange rate targeting, direct monetary controls to monetary targeting. The overall objectives of monetary policy have been the maintenance of macroeconomic stability and non-inflationary growth. In line with the global trend, Nigeria navigated towards adoption of Inflation Targeting monetary framework. But recent policy indication shows that the Central Bank of Nigeria (CBN) may have soft-pedaled in the pursuit of full-fledged Inflation Targeting  for the country. This paper attempted to critically analyze the basic issues, problems and prospects germane to the adoption of Inflation Targeting as a monetary policy framework for Nigeria. To do this, the paper examined the basic features and performances of inflation targeting countries globally,  adduced that Inflation Targeting is not “a cure-all medicine” and that it may not significantly reduce the real costs of disinflation in Nigeria in terms of a decline in output and an  increase in unemployment. For Nigeria, the extent of the success of Inflation Targeting, if and when adopted, will crucially depend on the availability of executive capacity, quality and timely data and the political will and commitment to the success of the programme on the part of monetary authorities.

KEY WORDS: Inflation Targeting, Policy consistency, monetary authorities