SAN FRANCISCO, July 24, (THEWILL) – Ahead of the two-day Monetary Policy Committee, MPC, slated to begin on Tuesday, the Central Bank of Nigeria, CBN, governor, Mr. Godwin Emefiele has foreclosed a reduction in the country’s interest rate, explaining that the CBN would be failing in one of its core mandates by cutting the rate at a time the inflation rate still hovers above 16 per cent.
He stated this at a lecture at the Second Homecoming series of the Department of Economics of the University of Nigeria, Nsukka, UNN, at the weekend, where he declared that Nigeria will exit the current economic recession by the end of this year barring any unforeseen shocks.
While stating categorically that inflation is still too high for interest rates to be cut, the CBN governor picked holes in the argument of those pushing for a cut in interest rate as a path to growth, pointing out that high inflation was inimical to economic growth.
He however pledged that the apex bank would continue relying on moral suasion as a means of encouraging lenders in the country to be more considerate in interest charges on customers.
“Interest rates reflect not just the cost of capital, but also the cost of doing business, and so we need to also look at interest rates from the perspective of the lender. Given that most banks have to individually provide security, power, and other infrastructure, it is not surprising that some of these costs are passed on to customers in the form of high interest rates,” he said.
Emefiele, whose lecture was entitled: ‘The Dilemma of Monetary Policy and Exchange Rate Management in a Recession: Potential Options for Nigeria’ disclosed that Nigeria’s current economic crisis had its roots in the external sector, following the continued slide in crude oil prices since the second half of 2014.
He said that the attendant fluctuations in the exchange rate (depreciation/ appreciation) had great consequences on output, inflation and other components of aggregate demand, “which directly impact the welfare of the ordinary man in a consumption and imports-dependent economy like Nigeria’s.”
The CBN governor went on to assert that, “barring any shock and with all the interventions, not just CBN, that government both the monetary and fiscal authorities are putting together, I believe that around end of this year, we should be out of recession.”
He continued, “The growth indicators are there for us to see. In January 2017, inflation was 18.8, now inflation is down to 16.24. By fourth quarter of 2016, growth was negative 1.72 per cent; first quarter of 2017, growth had improved to negative 1.52 per cent, which means we’ve seen an improvement in growth by 1.2 per cent.
“If we see another 1.2 per cent growth in second quarter, we are out of recession.”
Emefiele however recommended that for a sustainable growth to be witnessed in the economy leading to the expected exit from recession, government needs to spend more money in rebuilding infrastructure, explore more opportunities for Private Public Partnerships, PPP, pursue growthenhancing fiscal policies and jumpstart agriculture and agribusiness.
Others are; exploration of opportunities for more revenue, pursuit of nonoil exports, introduction of import reducing policies, curbing inflation and strong policy coordination.
He also stressed the need for fiscal policy to target improved productivity of labour and increase disposal incomes for workers, arguing that fiscal policy could consider ways of stimulating household consumption and business investments.
While identifying agriculture as the largest employer of labour in Nigeria, he said the CBN, working with relevant ministries and agencies, had contributed greatly to the revamping of the sector through its Anchor Borrowers’ Programme, ABP, and other agricultural interventions.
The CBN governor challenged tertiary institutions in the country to focus on research that will boost economic development, just as he assured that the CBN will work with relevant stakeholders in the educational sector to stimulate research for the overall good of Nigeria.
He expressed concern that the educational sector in the country had lost its glory, noting that any country desirous of making tremendous growth should focus on its health and educational sectors.
While recalling with nostalgia the glorious past of education in Nigeria, particularly at the UNN, when students on campus were fed with poultry products and bread on produced in the school, Emefiele, who is an alumnus of the institution, harped the need for all stakeholders in the educational sector to contribute their quota to restoring Nigeria to its pride of place in education.
