CBN aims for lower inflation as government offers tax benefits to attract investors

Olayemi Cardoso, the governor of the Central Bank of Nigeria, said on Wednesday that the bank is committed to reaching a single-digit inflation target.

Mr Cardoso spoke during the World Bank/IMF meetings in Bangkok, Thailand.

He explained, "The reason why we felt it was important to give ourselves this (Single-digit) as a target is to recognise the fact that inflation is probably the biggest threat to the poor, and so it is critical that we bring it down to levels that are more manageable, rather than the situation where you feel ‘okay, you’re lower double digits, and it’s okay’. It isn’t okay."

He added, "I mean, in this instance, inflation has gone from you know about 34, 35 percent to about 15, and yes, that’s a significant decrease, very significant. But what we are saying basically is that we are not going to rest."

Mr Cardoso continued, "And the medium-term target is to bring it down to single digits. Of course, as we embrace inflation targeting, that will obviously be a lot more open and transparent, and people will be able to have a clearer sense of the road of travel."

Borrowing and Market Monitoring

Also at the event, Patience Oniha, the Director-General of the Debt Management Office, talked about the borrowing plans for the last quarter of the year.

She said, "The calendar is a combination of large refinancing as well as new volume. So again, if that has affected the market, it will be a combination of things: lower rates from the MPR, but the volume is not entirely different from what we have done in Q3. Maybe Q1 and Q2 were a bit slow, but after the budget was passed, really our volumes increased. So those were a combination of refinancing and new borrowing; again, we monitor the markets. That’s why we put their provision; we watch the rates, watch the demand, and take it from there."

Government's Job Creation Efforts

On tax holidays and credits, Finance Minister Taiwo Oyedele said the government sees the need to create not just jobs, but good jobs.

He said, "Officially, our unemployment rate is around 5 percent and poverty rate is higher than 50 percent, so you have a lot of working poor."

He added, "On tax holidays, we’ve transformed our tax system. We have something that is better than a tax holiday. It’s called Economy Development Incentive, where you get a tax credit. The good thing about it is it’s hard to abuse, so you have to earn it to get the credit."

Support for Investors

While discussing setting up factories in Nigeria, Mr Oyedele mentioned that it is part of the investor deal room the government set up for interested investors at the meetings.

He said, "They will show you, they will handhold you, and make it easy for you to do what you have to do."