Excessive Cash Settlements Fueling High Core Inflation In Nigeria
Excessive reliance on cash settlements in Nigeria’s economy is a significant driver of high core inflation, a financial analyst Charles Iyore who is the Principal Partner at Dion & Associates Ltd has revealed.
Speaking on Sunrise Daily on Channels TV on Saturday noted the challenges posed by cash-based transactions and inefficiencies at both federal and state levels.
Charles Iyore pinpointed excessive cash transactions as a major contributor to Nigeria’s inflation woes, emphasizing the disconnect between monetary policy and real economic activities.
“We have an economy in which very many people are not part of—it’s like they’re spectators. This exclusion creates distortions.
“How much of the capital is converted into currency transactions? How much of that currency is applied in a manner that doesn’t cause inflation? If every settlement is by cash, moderating prices becomes difficult, leading to high core inflation” Iyore stated.
Iyore called for a more robust monetary framework to tackle the issue, stressing that “a sound monetary system, with effective instrument controls and a treasury that directs growth, is essential. Without these, efforts to stabilize the economy are undermined.”
He also advocated for national planning to provide a structured economic blueprint for states.
“Freedom doesn’t mean there are no boundaries. Each state should operate within a clear playbook aligned with national goals. The absence of a unified framework leads to rogue fiscal behaviour,” Iyore said.
Also speaking during the programme, Dr. Gbenga Adeoye, Principal Partner at Gbenga Adeoye & Co Ltd, shifted the spotlight to state governments, criticizing their lack of initiative in addressing critical infrastructure needs and inflation.
Despite increased federal allocations exceeding N1 trillion, Adeoye argued, state governments have failed to deliver tangible results.
“Over the years, when economic crises occur, the federal government gets the blame. Yet, 95% of state governments have not done what they ought to do,” he noted. “Some states have resources comparable to U.S. states, but where are the investments in roads, power plants, or industrial hubs? Most state governments are nowhere to be found.”
Adeoye lamented that inflation on essential goods—like food, which has risen above 40%—remains unchecked due to the absence of proactive state policies. He also criticized politically motivated spending, stating, “Instead of investing in critical infrastructure, states are buying SUVs for directors. This undermines any effort towards non-inflationary spending.”
The presidency must take the lead
While both experts agreed on the need for non-inflationary spending, they presented different solutions. Iyore emphasized the importance of centralized economic planning, urging the presidency to set the tone for fiscal discipline through the 2025 budget.
“The presidency must take the lead. He’s the one we’ve entrusted with our mandate,” Iyore asserted.
On the other hand, Adeoye acknowledged the limits of federal influence on state-level spending. “States are autonomous entities under the law. While the president can provide direction, governors must implement these principles independently,” he explained.
Adeoye called for stronger accountability mechanisms, adding, “Policy direction is good, but without oversight, it amounts to little. States must be held accountable for their spending choices to curb inflation effectively.”
More insights
During his 2025 budget speech, President Tinubu declared the Federal Government’s commitment to reducing Nigeria’s inflation rate from 34.6% to 15% by the end of 2025.
Tinubu stated, “The 2025 budget projects that inflation will decline significantly from the current 34.6% to 15% by the end of next year. Concurrently, the exchange rate will improve from approximately N1,700 per dollar to N1,500. These projections are critical for stabilizing the economy and ensuring sustainable growth.”
“Our focus is not just on macroeconomic stability but on creating opportunities for Nigerians to thrive. By enhancing infrastructure and ensuring adequate security, we can unlock the full potential of our economy,” Tinubu said.
Also, renowned economist and CEO of Economic Associates (EA), Ayo Teriba, earlier said that Nigeria’s inflation rate can be driven down to 5% by 2025 if the Federal Government successfully attracts $50 billion in foreign direct investment (FDI).
