Second-Round Effects, Central Bank Credibility, Exchange Rate Devaluation, and Monetary Policy in a Small Open Economy

The Centre for the Study of the Economies of Africa (CSEA) hosted  Dr. Jamilu Iliyasu from the Department of Economics, Ahmadu Bello University, Zaria, for an insightful paper presentation titled “Second-Round Effects, Central Bank Credibility, Exchange Rate Devaluation, and Monetary Policy in a Small Open Economy.” The event took place at the CSEA Conference Hall in Abuja on August 5, 2025, had in attendance, researchers, policy analysts, and economists.

Dr. Jamilu’s research explored how exchange rate fluctuations, the credibility of the central bank, and monetary policy interact to influence the second-round effects of food and energy prices on core inflation in Nigeria. He identified key drivers such as persistent increases in food prices, amplified through wage demands and slow wages adjustments, particularly in rigid labour markets. His findings revealed that energy price shocks are a major catalyst for food inflation, posing significant challenges to the Central Bank’s ability to meet its inflation targets.

To address these challenges, Dr. Jamilu proposed a policy mix that includes assertive monetary interventions, measures to strengthen the naira, and concerted efforts to restore trust in the Central Bank. The session concluded with a vibrant discussion, during which participants offered insightful feedback and engaged critically with the research findings.

This presentation enriched the discourse on inflation dynamics and macroeconomic policy in Nigeria, emphasizing the critical importance of  credible and coordinated policy responses to   manage external shocks.