Desirous of
ensuring monetary and fiscal collaboration in order to turn the economy
around, managers of the economy from the Central Bank of Nigeria (CBN),
the Ministries of Finance, Budget and National Planning, and Industry,
Trade and Investment confirmed THISDAY's exclusive report on Sunday of
their meeting in Abuja at the weekend to harmonise their policy
perspectives.
Speaking at the
opening of the two-day Monetary Policy Committee (MPC) retreat at the
CBN headquarters in Abuja, with the theme: "Pathway to Price Stability
Conducive to Economic Growth," the CBN Governor, Mr. Godwin Emefiele, at
whose instance the meeting was convened, reiterated the need for the
country's monetary and fiscal authorities to collaborate and harmonise
standpoints so as to develop the economy rapidly.
According to a
statement on Sunday at the end of the meeting, Emefiele, who also chairs
the MPC which shall start its two-day meeting on Monday in Abuja, said
the retreat which for the first time had in attendance large
representation of the fiscal authorities, is coming at a time the
country is facing serious economic challenges.
He added that finding sustainable solutions require broadened participation of colleagues from the fiscal side.
He said the retreat, as a brainstorming session, would provide perspectives on certain MPC decisions.
He said it would
also close the gap on the coordination between monetary and fiscal
authorities to chart a common course and take decisions to develop the
economy.
In his remarks, the
Minister of Budget and National Planning, Senator Udoma Udo Udoma, said
both the monetary and fiscal authorities have no choice but to work
together to guarantee the country's economic growth.
He posited that the
pathway to a lower interest rate was through monetary and fiscal
authorities collaboration with the private sector.
Also speaking, the
Minister of Finance, Mrs. Kemi Adeosun, and her Industry, Trade and
Investment counterpart, Dr. Okechukwu Enelamah, both agreed that solving
the challenges facing the Nigerian economy required unconventional
tactics.
Adeosun, while
disclosing that there remained a huge number of unbanked Nigerians whose
contributions to the economy are hardly captured, said the government
must devise ways to bring them into the financial mainstream.
She also hinted
that based on the current realities, the federal government would have
to borrow more to meet its infrastructure funding obligations.
Enelamah emphasised
the need for the monetary and fiscal authorities to ensure business,
market and investor confidence, as well as policy integrity, in order to
improve on the ease of doing business in Nigeria.
In her
presentation, the Deputy Governor, Economic Policy, CBN, Mrs. Sarah
Alade, said the onus of achieving the dilemma of low interest and
exchange rates as well as low inflation should not entirely be the
function of the monetary authority. She said it requires collaboration
with fiscal authorities.
According to her, there was need for deliberate policies that would promote stability and engender growth in the economy.
Meanwhile, as the MPC commences its second meeting for the year on Monday, attention would be focused on the committee.
The meeting will be
coming on the back of slight improvements in most macroeconomic indices
ranging from the country's GDP growth rate to foreign exchange
administration.
In the domestic
economy, the National Bureau of Statistics (NBS) last month reported
that the Nigerian economy contracted by 1.5 per cent in 2016, marginally
lower than the 1.7 per cent forecast by the International Monetary Fund
(IMF).
Also, the rate of
contraction in the fourth quarter of 2016 slowed down to -1.3 per cent
from -2.24 per cent in the third quarter of the same year.
The inflation
report for the month of February also indicated a moderation in the
Consumer Price Index (CPI) to 17.8 per cent year-on-year, the first
decline in 15 months.
Furthermore,
increased foreign exchange supply to the market since last month when
the central bank announced changes to its foreign exchange policy, saw
the naira appreciate to N449 to the dollar last Friday, just as the CBN
has continued to shore up foreign reserves to $30.3 billion on the back
of improved oil output and prices.
But as the
committee sits to deliberate on a rate decision and other monetary
tools, Afrinvest is of the view that the MPC will maintain the status
quo on all rates.
The investment firm also said the CBN would have to focus on improving liquidity in the foreign exchange market.
"A rate cut could
dampen CBN's efforts to mop up excess liquidity from the system which
could hamper the stability of the foreign exchange market.
"On the flipside, a
hike in the rate may also be sub-optimal at this time as this may
further squeeze out liquidity from the banking system as banks may
deploy funds towards investment securities while also constraining
growth, thus worsening the economic conditions.
"Therefore, on a
balance of considerations, we think the MPC will maintain status quo on
all rates while trying to consolidate on the gains of recent
improvements that have been recorded in inflation, the parallel market
FX rate, increase in oil production and the release of the Economic
Recovery and Growth Plan by the fiscal authorites," Afrinvest said.
Financial
Derivatives Company Limited, on the other had, stated that "the next MPC
meeting in March could see the CBN take a more decisive step towards an
accommodating stance following an improved (though still negative) GDP
growth rate and a possible decline in headline inflation".
