At the end of the Central Bank of Nigeria’s Monetary Policy Committee (MPC) meeting today (Tuesday), a favourable verdict on the economy is not likely. The last MPC meeting in the first quarter of 2016 is expected to acknowledge that domestic growth is still weak, that inflation is rising, and that scarcity of fuel and power is eating into people’s comfort, time and money.
With little growth for four consecutive quarters now, has the nation’s economy implicitly entered into a recession? Whether the answer is yes or no, there is no denying the fact that the CBN has done everything within its powers to ward off a recession. However, good monetary policy (CBN’s basic responsibility) must be complemented by good fiscal policy. Obviously, it is the latter that has been deficient. In a developing country like Nigeria, government needs both policies as tools for achieving macroeconomic stability.
In the face of dwindling oil income, the monetary authorities have taken steps necessary for managing foreign exchange, interest rates and inflation. That is their core responsibility. And because fiscal policy support was lacking, they had to move fast by discouraging importation of over 40 items that guzzled scarce foreign exchange. The price of crude oil, Nigeria’s main foreign exchange earner, has gone southwards: from $112 per barrel in June 2014 to less than $40. Records show that importers request $3.6billion monthly while the foreign exchange that flows into the country is often less than $1billion.
Judging by the steps it has taken so far with respect to managing forex, the CBN deserves high marks. Without proper management, the nation’s foreign reserves would have vanished by now, putting this import-dependent economy into deeper trouble. The reserves have been so cleverly managed that, despite the low oil price, the country has not been blacklisted in international trade. As former CBN governor and now Emir of Kano Muhammed Sanusi II stated recently, there is no reason to continue to permit importation of goods that are produced in Nigeria. Happily, the forex squeeze has not affected manufacturers who import machinery and intermediate goods necessary for them to remain in business. Nigerians’ insatiable taste for foreign goods just has to be curtailed.
We believe everyone has now understood the need to “buy Nigerian”. If jobs must be created for the teeming youth, then, local industry must be helped to grow. We are satisfied with the low-interest loans currently being extended to micro, small and medium enterprises. It is left for federal and state governments to improve power supply, roads and rail as well as other vital infrastructure to make the atmosphere conducive for entrepreneurs. Also, to encourage made-in-Nigeria goods through import restriction, the borders should cease to be porous; otherwise, the benefits of forex controls would be lost.
It is gladdening that the 2016 budget will be passed by the National Assembly and signed into law by President Muhammadu Buhari this week or next. A reversal of the nation’s economic fortune should therefore be earnestly pursued from the second quarter of 2016.The CBN has been able to keep the nation safe from danger for the period of the budget delay. Now, the fiscal authorities should move in and complement the apex bank’s efforts: Projects that have been earmarked in a bid to encourage solid minerals’ development, agriculture and manufacturing should be executed at once, since a reflation of the economy appears most desirable at this time. Anyone seen with a banned foreign item should have questions to answer, as should those charged with policing our borders.