Federal government has to pay up its domestic debts if it wants to see Nigeria out of economic recession, says CBN Governor
When Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, took the microphone this week, he wasted little time in throwing the Muhammadu Buhari led federal government under the bus.
The CBN held a two-day meeting to review its monetary policy instruments, on Tuesday.
At the end of the meeting, the apex bank retained its Monetary Policy Rate (MPR) at 14 percent; its Cash Reserves Ratio at 22.5 per cent and its Liquidity Ratio at 30 percent.
In retaining all its instruments, Emefiele said the CBN saw no need to change anything because the problem with Nigeria's economy isn't with its monetary policies but with the fiscal policies of the federal authorities.
MPR refers to the minimum rate banks are allowed to borrow from the CBN.
Fiscal policies have to do with federal government spending and taxes.
On Monday, the National Bureau of Statistics (NBS) reeled out more grim news for Nigerians.
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For the third consecutive quarter in 2016, the Nigerian economy suffered a contraction.
Africa's biggest economy shrank by -2.24 percent after recording -2.06 percent in the preceding quarter.
Inflation spiked to 18.3 percent year-on-year--a 0.4 percent increase from the last quarter.
Emefiele's CBN has tried everything, including using law enforcement to chase after hoarders of hard currency.
But the problems with the economy have persisted.
On Tuesday, Emefiele told the world that the federal government is to blame.
“The MPC (Monetary Policy Committee) urged the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitising the debts in order to settle its outstanding domestic contractual obligations, which cut across all sectors of the economy", the CBN Governor warned.
In other words, Emefiele was putting the nation's economic woes down to the debts owed contractors and businesses by the federal government.
“These accumulated debts have slowed the business activities of economic agents, most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the bank (CBN) to commit to greater surveillance and deployment of early warning systems in managing the banking system” , he said.
Financial analysts have also pointed to the lack of coordination between monetary and fiscal policies, while discussing Nigeria's current economic woes.
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During his presentation, Emefiele alluded to the discordant tunes between his office and that of Finance Minister, Kemi Adeosun.
“Members stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations", Emefiele said.
The CBN Governor was saying that the problems with the economy are more structural than monetary.
And the Federal government is responsible for the structural side of things.
There is no sugar-coating this--this was the nation's CBN Governor asking the Buhari administration to do more to get the country out of recession.
Pulse did ring Finance Minister Adeosun for a response to Emefiele's comments, but the calls went unanswered. A text message sent her way was also not replied.
As the recession continues to hit Nigerians hard, Minister of Information, Lai Mohammed, has however commended the citizenry for their resilience.
"We are not unaware of the harsh effects of the recession on the citizens. We share in their pains and we make no excuses as we continue to work round the clock to ensure that this tough time is quickly brought to an end. The good news is that the prognosis for a quick end to the recession is encouraging", said Mohammed.
“As the saying goes, the recession is a bend in the road, not the end of the road. The challenge for us as a government is to turn the bend, and we are doing just that,” he said.
Mohammed added that "the government is investing massively in infrastructural development: roads, railways, power and creating jobs in the process, as part of efforts to pull the country out of recession".
A plunge in the global price of crude oil and vandalism in the oil rich Niger Delta region, were some of the factors which herded Nigeria into a recession.
Others were a lack of political will to diversify sources of government revenue, corruption and inability to save for the rainy day.