•Says CBN may raise interest rates
By Chinwendu Obienyi with agency report
London-based Financial Times publication has said that Nigeria looks increasingly likely to lose out on its early reforms gains which had initially resulted in positive signals for the country’s development.
This was even as the report stated that the new leadership of the Central Bank of Nigeria (CBN) may increase interest rates at its next Monetary Policy Committee (MPC) meeting.
President Bola Tinubu had kick-started his government administration with a bang in his inaugural speech, May 29, 2023, that fuel subsidies will become a thing of the past while heading towards a unified exchange rate.
The president’s pronouncement immediately spiked off price increases in food, transport fares as anger labour unions threatened strikes. Two months later, the President revealed that over N1 trillion has been saved since the removal of subsidy and move to unify exchange rate.
Furthermore, Nigeria’s stock market emerged one of the best performing exchanges, after hitting a 15-month high.
The country’s sovereign dollar denominated bonds rose sharply as investors welcomed the suspension of the erstwhile CBN Governor, Godwin Emefiele.
However, the nation’s indices plunged as inflation accelerated to a 18-year high from 24 per cent in July to 25.8 per cent in August 2023. Worse still, dollar liquidity tightened as investors seek to clear a backlog of $7 billion in previously unsatisfied demand.
After a convergence of the official and black market rate, a gulf has reopened: the parallel rate has fallen to N1,000 versus an official rate of N785.
Reacting to the current development of the Nigerian economy, the London news agency said that there are signs of President Tinubu’s economic reforms going not as planned.
It stated that Tinubu has not done nearly enough to explain the rationale of a policy that, to many Nigerians, seems like the withdrawal of the only thing the state had ever done for them.
“In removing a costly fuel subsidy and in shifting towards a market-driven exchange rate, which has sharply weakened a previously overvalued currency, he has gone some way towards persuading investors he is serious about reform. But four months into his presidency, there are signs of things going awry,”, it said.
With the confirmation of Olayemi Cardoso as the new CBN Governor, the report explained that markets consider Cardoso, a former Citibank Nigeria chair, to be a sound appointment. (The same cannot be said of all of Tinubu’s picks.) and added that the CBN Governor will probably need to raise rates at the next policy meeting to establish his inflation-busting credentials.
According to the report, it is vital that Tinubu restores institutional independence by leaving the bank to get on with its job.
It thereafter called on Tinubu to be more articulate and continue to spell out his policies to Nigerians.
“He should also refrain from announcing plans — including the restoration of democracy in Niger — without any real idea of how to implement them. Execution is key. Only four months into his presidency, what started out with a bang risks becoming a whimper. Tinubu needs to regain the momentum”, the report said.