Moghalu, a political economist and former presidential aspirant, highlighted the inflationary impact as the most significant and immediate threat, particularly in the context of the removal of petrol subsidy and the floating exchange rate of the Nigerian currency. He warned that inflation in Nigeria is expected to further escalate in the near future. However, he acknowledged that Nigeria's economy does not always adhere to conventional economic principles, making it challenging to attract capital by keeping interest rates high in response to rising inflation.
Despite efforts to combat inflation by raising interest rates, Moghalu pointed out that there are several reasons for the continuous surge. He argued that the current round of inflation is not solely explained by the standard definition of too much money chasing too few goods but also involves a cost-push factor. Furthermore, Moghalu revealed that the central bank itself contributes to inflation through the illicit financing of the federal government's substantial deficits, amounting to N23 trillion, through ways and means lending.
Moghalu criticized the contradictory stance of the central bank, noting that it claims to fight inflation while simultaneously contributing to it through illicit financing. He attributed the high levels of ways and means lending to the government's inability to manage its fiscal responsibilities, resulting in the fiscal period of the price ladder becoming relevant alongside the quantity theory of money, thereby causing inflation in the market.
The former CBN deputy governor advocated for the independence of the apex bank from government influence to effectively manage inflation. Moghalu stressed that if the federal government assumes greater responsibility and discipline in budgeting and spending, it would aid the central bank in controlling inflation. However, he highlighted the challenge posed by the government's excessive spending and borrowing, leaving the central bank alone to manage the consequences of inflation, which becomes increasingly difficult.
Moghalu emphasized the necessity of central bank independence to address the "time inconsistency problem" and ensure effective measures are implemented to curb inflation. With inflation posing a significant challenge to Nigeria's economy, the former CBN deputy governor urged for a more responsible and disciplined approach from the government to support the central bank's efforts in managing inflation effectively.