*With the recent economic downturn facing the nation gradually snowballing<\/p>\n
to becoming one of the greatest challenges of this administration, Aminu
\nImamin this piece, examines the Central Bank of Nigeria (CBN)\u2019s monetary
\npolicy measurestowards ensuring price stability.*<\/p>\n
The President Buhari-led administrationappears to be doing a wonderful job
\nfighting corruption. The last time this monster was tackled head-on in this
\ncountry, was in 1984, by the same Head of State Buhari.<\/p>\n
Then as now, the price of crude oil created the havoc. Then, as now, there
\nwere discordant views about whether or not the government should devalue
\nthe currency or not.<\/p>\n
Meanwhile, as the administration is focusing on the battle against
\ncorruption and on external affairs, there is no discernible policy
\ndirection of government with regards to the economy and there\u2019s an
\noverwhelming feeling among most informed that the economy is faltering at
\nan alarming rate and a resignation that it might never get better than this
\nwithout some sort of dramatic change\u201d.<\/p>\n
An oil producing country like ours is unable to meet up with its local
\ndemands on the derivatives from the crude oil that it produces yet the
\ngovernment appears not to be bothered.<\/p>\n
Prices of goods including spare parts have skyrocketed with no hope of
\ncoming down again, heightening inflation pressure.<\/p>\n
The Government may pretend not know it but it is the reality on ground.
\nPure water sachet is now selling for N10 as against N5 in the North and N20
\nas against N10 in Lagos and places like Abuja; this is not because there
\nare water shortages in the country, allegedly due to the cost of importing
\npolyethylene, a raw material for making the sachet, which has shot up.<\/p>\n
Already, prices of consumer products and household items like mobile
\nphones, electrical components and electronics have been inflated by over 20
\npercent, as such products are imported and assembled locally.<\/p>\n
The macro-economic forecasts published recently by the National Bureau of
\nStatistics (NBS) on the nation\u2019s major economic indicators has shown that
\nthere is a cause to worry even as they point to a looming recession.<\/p>\n
Growth in the economy slowed to 2.8 percent last year, the weakest level
\nsince 1999, the statistics agency said March 10. Industrial output
\ncontracted 2.2 percent last year, compared with expansion of 6.8 percent in
\n2014.<\/p>\n
An analysis of Nigeria\u2019s economic indicators showed that Business
\nConfidence stood at 8.3 percent as at the end of last year, down by 6.6
\npercent from 14.9 percent recorded at the third quarter of 2015. As at the
\nlast quarter of 2015, consumer confidence in Nigeria dropped to -3% from
\n-1.9% recorded the previous quarter.<\/p>\n
During the same period, unemployment grew at a rate of 9.9 percent, from
\n8.2 percent recorded at the previous quarter.<\/p>\n
Although the CBN had earlier stated that inflation could remain within
\nsingle digit if necessary actions are taken, the Consumer Price Index
\n(CPI), which measures inflation, rose significantly to 11.4 percent in
\nFebruary, compared to 9.6 percent the previous month, according to the NBS.<\/p>\n
This is contained in the February 2016 CPI\/ Inflation Report issued by the
\nNBS in Abuja this week. The CPI measures the average change over time in
\nprices of goods and services consumed by people on daily basis.<\/p>\n
Also, the country\u2019s manufacturing production rate dropped to -0.3 percent
\nat the second quarter of last year, from -0.7 percent recorded the previous
\nquarter; this is just as economic analysts Mckinsey predicts Nigerian
\nmanufacturing sector has the \u2018potential\u2019 to deliver output of $144bn a
\nyear
\nby 2030, up from $35 bn in 2013.<\/p>\n
Lately, faced with an imminent decline in their stocked raw materials
\narising from inability to access more for their local production, some
\nlocal manufacturers have started rationing what they have as inflation hits
\nconsumer prices.<\/p>\n
The task before the CBN Governor Godwin Emefiele is indeed herculean.
\nLamenting the seemingly ambiguous role played by the CBN, billionaire
\nindustrialist and chairman of one of Nigeria\u2019s largest foods &
\ninfrastructure conglomerates, BUA Group, AbdulSamad Rabi\u2019u, *\u201c*On one
\nhand,
\nthe Central Bank of Nigeria (CBN) claims to be safeguarding the currency in
\nline with the Federal Government\u2019s resolve to protect the Naira but on the
\nother hand, the lack of a transparent exchange rate policy and inequitable
\ndistribution of foreign exchange to all players in key sectors meant to
\nboost local production only worsens an already bad situation\u201d.<\/p>\n
Thankfully, Emefiele and the Trade and Investment Minister, Okechukwu
\nEnelamah are already discussing ways to ensure supplies of foreign exchange
\nto manufacturers as the plunge in oil prices constricts dollar inflows.<\/p>\n
Everybody knows that the classical definition of inflation means too much
\nmoney chasing too few goods \u2013 irrespective of whether those goods are
\nimported or produced locally.<\/p>\n
Nigeria remains an import-dependent nation; and we all contributed to
\nmaking it that way and we have not even started to control our appetite for
\nimports.<\/p>\n
Many economic experts and social commentators have said the current rate of
\nrising inflation requires the CBN\u2019s urgent attention because of its adverse
\neffects on the economic well-being of the citizens.<\/p>\n
Critics however have always pointed out that the inflation rate in Nigeria
\nis firstly artificial in most cases because value of goods and services
\nreally has no pricing index.<\/p>\n
Some years ago, pertinent questions regarding CBN\u2019s monetary policy
\nmeasures were raised at the annual general meeting of the Money Market
\nAssociation of Nigeria in Abuja. These include, firstly, should the
\nCBNfocus only on inflation targeting, while quite a number of other
\nprospects exist?<\/p>\n
Second is the challenge of fiscal shocks\/surprises, which appear to be a
\nregular feature of the Nigerian economy. The question of who sets the
\ntarget must also be answered; is it the government, the CBN or both? Should
\nthe target be point or range?<\/p>\n
Fourth, is the accountability of the CBN and the provision of timely
\ninformation on a consistent basis, capable of generating an explicit
\nquantitative target for inflation, and articulation of policy based on
\nforward-looking assessment of the inflation process?<\/p>\n
These are indeed issues that may pose great challenges to an effective
\ntransition to a new monetary framework.<\/p>\n
Growth in any economy means nothing if the inflation rate in that economy
\nis on the high side. High inflation rate renders useless any positive
\ngrowth in an economy, so much so that such growth is barely recognizable.<\/p>\n
As industry observers worry on how long it would take for this inflationary
\ntrend to be halted, even a forlorn hope seems like a mirage, because there
\nis no vibrant economic team to tackle these economic challenges and provide
\nclarity and direction of economic policies. All we have is widening team of
\nmedia foot soldiers who, for now, specializes in sustaining the sermons of
\nmelancholy inherited by the regime.<\/p>\n
Sounding out a note of warning, Chairman, Stanbic IBTC Holdings Plc, Atedo
\nPeterside, says the foreign exchange policy adopted by the federal
\ngovernment under the leadership of President Muhammadu Buhari \u201cappears
\nunsustainable\u201d.<\/p>\n
Speaking at the 2016 Standard Bank West Africa investors\u2019 conference in
\nLagos on Tuesday, Peterside said investors do not like uncertainties as
\nseen in the new administration over the past few months. \u201cIn early
\nSeptember, 2015, the big unknown was the country\u2019s economic policy
\ndirection and the likely composition of the president\u2019s economic
\nteam,\u201d he
\nsaid.<\/p>\n
\u201cThe team is now in place but the greatest policy uncertainty of all
\nremains and that is an exchange rate policy regime that threatens the
\nfoundations of macro-economic stability and appears to be unsustainable.<\/p>\n
As another observer alsoput it, \u201cWe\u2019re on board with diversity but we
\ndon\u2019t
\nhave enough people in the decision-making process. We only have decision
\ninfluencers\u201d.<\/p>\n
Others who had adopted a wait-and-see attitude wanting to see how this
\ngovernment will manage the economy are fast losing their patience because
\nthey have seen enough.<\/p>\n
Given that over-production and excess demand are the major causes of
\ninflationary trends, the challenge before the CBN therefore is to grow the
\neconomy by ensuring reasonable growth for the real sector. This can be done
\nwith its monetary policy instruments, which experts say is necessary in
\nemployment generation, poverty reduction and sustainability of
\nmacro-economic growth rates and objectives of any serious government.<\/p>\n
Overall, the apex bank would need to reinforce its technical capacity for
\nthe analysis of monetary policy and a comprehensive toolkit for
\nmacro-economic projections in order to smoothly transit to a new framework.<\/p>\n
Recall that the Chairman of the US Federal Reserve Bank, equivalent to our
\nCBN Governor, Dr. Arthur Burns, once said that \u2018if a nation allowed an
\nuntenable economic situation to persist for too long, suddenly, there are
\nno good options left\u2019. Nigeria is slowly but surely approaching a situation
\nwhere there are no good options left. Even now, the options have been
\nreduced to few. But another delay will spell doom.<\/p>\n
Stakeholders are therefore calling on the relevant authorities to bring the
\ninflation and interest rates down if they do not want the economy to
\ncollapse.<\/p>\n
As AbdulSamad Rabi\u2019u had summarised: \u201cIt may take a while to get there
\nbut
\nwith the programmes being put in place by the current government coupled
\nwith proposed investments in infrastructure, we will surmount these
\nchallenges\u201d.<\/p>\n
END<\/p>\n","protected":false},"excerpt":{"rendered":"
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