Lagos, Nigeria - The Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido, has disagreed with the International Monetary Fund (IMF) categorization that Nigeria's Monetary Policy had conflicting objectives. “I’d like to first of all start by saying that we appreciate IMF’s comments on our economy and the support they have given us so far. However, it is important to state that the days have gone when Central Bank Governors simply accept everything that they have said and conflicting objectives in Central Banking are not unique to Nigeria,' Lamido said in a statement, made available to PANA.

He said Most Central Banks in developing economies do have policies that support stability that is conducive to growth and development. The CBN chief added that it would be extremely dangerous to create the impression that multiple objectives were necessarily mutually exclusive or conflicting.

“There is nothing that says that pursuit of moderate inflation should blind us to the need for growth and development in a country like Nigeria and this has been a source of debate with IMF. We think that a Central Bank in a developing economy is not an inflation targeter and we have continued to say that we would pursue price stability but we would also continue to take seriously our role as a developmental Bank and contribute to the growth of the real economy and we don’t see any necessary conflicts”, he added.

Lamido said the CBN could not have tightened money as suggested by the IMF, when the financial system has not stabilized and when half of the banks are undercapitalized.

He said inflation in United Kingdom was about 4%, adding that the Bank of England had not tightened its monetary policy

He emphasized that no central bank governor after the great depression and what happened in Japan in the 80s would tighten money without first finding solutions to the crisis in the banks.

“Until we have the Assets Management Corporation of Nigeria (AMCON), it was too big a risk for us to start tightening and the moment we had the bill and the board, we will take the right steps with signals that we were going to tighten.

The issue is not whether we should or should not have raised interest, but whether we should raise interest and tighten money at a time when the banking system was a big risk to the economy. Now that it is no longer a big risk, we have done the right thing and this was our argument with IMF,” Lamido said.

On the whole question of unbridled government spending which has also added to inflationary pressures and depletion of the foreign reserves, the CBN chief agreed that the time had come to start fiscal consolidation and retrenchment,

“We have always made it clear that we should reduce overhead and recurrent expenditure and this has been the position of the Central Bank,' he said.

Lamido attributed the depletion of the foreign reserves to the investment on new power projects and the need to invest money to replace oil wells that had been bombed by the militants in the past. He said there was no need for panicking.

“The reserves position in Nigeria today covers more than 12 months imported goods and servises. We are not in any way in a desperate situation and when people say that the Naira is overvalued, I ask them in relation to what? Nobody has given me an answer to that” the CBN  chief queried.

He also disagreed with the suggestion by the IMF to devalue the Nigerian currency, the Naira, adding that such move would add to inflation.

“I have made it very clear that we are not there to defend the Naira at that level at all cost, but we do not have any fundamental reason for reducing the value of the Naira. I have had this debate with the IMF, the recommendations they made are internally inconsistent. If we devalue the currency or we depreciate the currency, it adds to inflation. If we have a volatile exchange rate, it affects inflationary expectations.”, he explained.

According the apex bank, inflation declined to 12.1% in January, 2011, from 14% at the beginning of 2009.

Pana 22/02/2011