The Central Bank of Nigeria (CBN) has again attributed current economic crises to a mix of external factors like slide in crude oil prices, and internal factors such as under-investment in domestic productive sector.
The institution also listed the country’s decayed infrastructure, and the challenge of persuading deposit money banks in Nigeria to channel credit to the real sector.
CBN Governor, Godwin Emefiele, said this while speaking on developments in the Nigerian economy, in a paper titled: “The Dilemma of Monetary Policy and Exchange Rate Management in a Recession: Potential Options for Nigeria”. He said the challenges prompted the CBN to fashion out an appropriate exchange rate strategy to achieve price and financial system stability and restart growth.
Presenting the paper at the Second Homecoming series of the Economics Department of the University of Nigeria, Nsukka, yesterday, he expressed concern that the educational sector in the country had lost its glory, noting that any country desirous of making tremendous growth must prioritise health and education.
He recalled that there was a time when UNN students were fed with poultry products and bread produced in the school and stressed the need for all stakeholders in the education sector to contribute their quota in restoring Nigeria to its pride of place.
Emefiele also 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 to stimulate research for the overall good of Nigeria.
The bank chief noted that CBN, as part of its contribution, had contributed to education through the provision of Centres of Excellence in some universities across Nigeria to encourage world class research and stimulate growth.
To address the ongoing challenges, he noted that the CBN introduced policies at both the management and the Monetary Policy Committee (MPC) levels targeted at stabilizing the economy.
Of particular reference was efforts made by the bank in checking the further depletion of Nigeria’s external reserves in the face of dwindling income and increased demand for foreign exchange.
The bank also had to make the foreign exchange market flexible as well as prioritise the most critical needs for foreign exchange, after restricting access to the foreign exchange for a category of 41 commodities, which it saw as being unnecessary drains to the country’s reserves.
He said the institution had been unjustly castigated for taking actions in the best interest of the economy, but would not be deterred from its objective of setting it on the path of sustainable development in the medium to long-term.
As a way out of reliance on other countries’ products, which could be produced locally, he emphasised the need for the country to invest in basic infrastructure such as roads, bridges, airports, railways and information technology.He added that the country also needed to explore opportunities in Public Private Partnerships for infrastructure projects that could offer lucrative returns to investors and help drive economic growth across Nigeria.
Emefiele also stressed the need for fiscal policy to target improved labour productivity and increased disposable incomes for workers, as ways of stimulating household consumption and business investments.
Citing agriculture as the largest employer of labour in Nigeria, he pointed out that CBN, working with relevant Ministries and agencies, had contributed greatly to the revamp of the sector through the Anchor Borrowers’ Programme (ABP) and other agricultural interventions. So far, the bank has committed about N29 billion to the ABP with active participation of 24 states of the federation.
Other policy options listed by the CBN Governor include: exploration for more revenue, pursuit of non-oil exports, and enactment of import-reducing policies that will encourage Nigerians to look inwards and discourage the importation of items that can be produced in Nigeria.
With the inflation rate still hovering above 16 per cent, Mr. Emefiele said the CBN would be failing in one of its key mandates if it cuts interest rates at this time. He disagreed with argument of those pushing for a rate cut as a path to growth, noting that high inflation was inimical to economic growth.
“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 explained.
However, he assured that the CBN would continue to rely on moral suasion to encourage Deposit Money Banks in the country to be more considerate in interest charges on customers.