Why CBN takes hard economic decisions – Analysts

Due to the mixed reactions which has continued to trail the outcome of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN), financial analysts and industry experts have explained that the apex bank had to come up with hard economic decisions, so as to restore investors’ confidence and make the Nigerian economy attractive for foreign capital inflows.

They believe that over the last two years, policymakers in emerging and frontier markets have had to deal with a cross-current of headwinds arising from internal and external sector imbalances occasioned by several factors including, the crash in commodity prices, normalisation of monetary policy by the US Fed, faltering global growth (led by China) and the heightening risk outlook posed by Brexit, illiquidity in domestic capital markets and volatility in global financial markets.

In his review of Macroeconomic environment and Nigerian Banking sector performance in 2015/2016, Group Managing Director/CEO, Afrinvest West Africa Limited, Ike Chioke, noted recently that the fall in global oil prices as well as militancy induced output disruptions have fundamentally crippled the fiscal earning capacity of government and also undermined external sector and financial system stability.

He opined that the introduction of a flexible foreign exchange policy which resulted in circa 37.0 percent depreciation of the naira at the interbank as well as the hike in benchmark lending rate to 14.0 percent were some of the positive steps that have been taken by the apex bank.

According to him, the introduction of a flexible foreign exchange policy which resulted in circa 37.0 percent depreciation of the naira at the interbank as well as the hike in the benchmark lending rate to 14.0 percent were some of the positive steps that have been taken.

“Depressed government revenues have significantly weighed on the viability of Sub-Nationals in particular, with some 26 States unable to meet their employee wage obligations, prompting the Federal Government to provide bailout packages in order to preserve social security”, he added.

He, however, believed that the country is heading into the right direction with the decision of groups of experts and economists within the apex bank.

In a similar direction, Chairman, First Bank Plc, Ibukun Awosika, said less emphasis needs to be placed on import substitution as a strategy but propping non-oil export industries via promotional campaigns and infrastructure support programmes.

In her words: “The need to improve infrastructure stock of the country was captured in the 2016 budget with more allocations going to capital projects. Yet, we think infrastructure spending needs to be more strategic with an over-arching focus to promote agriculture, industry and services.

“Government should embark on a comprehensive re-organization of the agricultural industry, increase investment in processing and storage plants and also drive expansion in exports in a bid to expand source of foreign exchange earnings”, she maintained.

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