•Experts list quick fixes for economy
From Uche Usim, Abuja
As the new Governor, Central Bank of Nigeria (CBN), Dr Olayemi Cardoso, and the four deputy governors-Emem Usoro, Muhammad Abdullahi Dattijo, Philip Ikeazor and Bala Bello, secure Senate’s nod to assume duty, they will be sailing on tempestuous waters as the struggle to rescue Nigeria’s sinking ship back to calmer waters hightens .
They are being welcomed by a sunken naira, that hit N1,000/$1 in the parallel market on Tuesday.
Also needing immediate intervention is Nigeria’s soaring sovereign debt currently estimated at N87 trillion (when the CBN’s Ways and Means advancement of about N27 trillion is factored in). The new CBN team will also be battling low exports, double-digit inflation, shrinking food production, sub-optimal crude oil production, N2.7 trillion currency in circulation, rising debt service payments, crude swap deals and depleted foreign reserves.
But despite all the challenges, economic experts and indeed the generality of Nigerians are looking unto them to fix the economy by devising ways of tackling the foreign exchange scarcity horror, poverty and other hardships continue pushing Nigerians to suicidal options.
Experts urge the CBN management to urgently initiate far-reaching monetary policy objectives that will reduce headline inflation rate, currently at 25.08per cent as at August.
This was attributed to a spike in the price of petrol and the depreciation of the naira. Food inflation was 29.34 per cent. This represents an increase of 235 basis points when compared with the previous month’s levels.
Analysts say there is a need for the CBN to focus on the three components of inflation, core inflation, food and energy inflation.
They also amplified the call for the nation to increase productivity in agriculture and other sectors to fight soaring inflation.
This entails the government, both at national and sub-national levels, to rejuvenate agriculture and squarely address insecurity to improve food production.
According to Professor of the capital markets, Uche Uwaleke, the new CBN management must endeavour to halt present policy tightening stance of the apex bank by putting in place deliberate measures to engender a low interest rate regime that will facilitate access to capital by the nation’s SMEs.
“On the vexed issue of forex management, his plan to clear the backlog of forex would be a step in the right direction as it would go a long way in restoring the confidence of investors in the Nigerian economy.
“I equally expect him to pay close attention to the supervision of Deposit Money Banks in particular as well as ensure compliance with corporate governance code by regulated financial institutions”, he told Daily Sun.
Also, the Centre for the Promotion of Private Enterprise (CPPE) has set a 10-point agenda for the new CBN management.
The Director General of CPPE, Dr Muda Yusuf, revealed that the most urgent task is restoring confidence in the foreign exchange market.
Others are; deepening the financial system; efficiency of the financial system; capital requirements for banks; ways and means financing of fiscal deficit; naira redesign policy; concentration risk in banking sector; stakeholder engagement; corporate governance and tenure and cost of funds in the banking system.
As regards sanitizing the foreign exchange market, Dr Yusuf said: “There is a serious confidence crisis in the foreign exchange market fueling an unprecedented speculative onslaught on the naira.
“The economy is grappling with severe adverse effects of depreciating exchange rate, soaring energy costs, ravaging inflationary pressures, huge backlog of foreign exchange obligations that need to be cleared and debt service obligations that need to be redeemed.
On ways and means of financing the fiscal deficit, he said it must be kept within statutory limits to avoid the damaging impacts of high-powered money on the macroeconomic environment. With regards to the naira redesign policy, Dr Yusuf said it should be suspended indefinitely. “It should not be a priority at this time. There was really no compelling argument to undertake the naira redesign in the first place.
“However, the momentum for the cashless economy should be sustained without resorting to the crude methodology of cash confiscation adopted by the previous dispensation in the CBN. The approach was very disruptive and inflicted unbearable hardships on businesses and the citizens”.
He also spoke about the tenure of funds in the country’s banking system, saying it is extremely short.
“Over 85% of deposits in the banking system are less than one year tenure. This maturity structure of funds cannot support economic growth. What it means is that long term investment cannot be supported by our banking system.
“Doing so will result in serious mismatch of tenure which could pose a risk to the banks’ stability. In 2021, the banking industry recorded a negative asset -liability mismatch of N45.6 trillion, according to the NDIC. This is not healthy for the banking system and the economy”, he said.
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