By Chinwendu Obienyi
The Federal Government and the Central Bank of Nigeria (CBN) have been urged to look at ways of raising equity so as to reduce the current scarcity of foreign exchange (FX) in the nation.
This was the view of the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, during a monitored television programme recently.
Teriba, while reacting to the CBN’s Monetary Policy Committee (MPC) decision to retain all parameters, said the variables seen by the CBN cannot be limited to inflation at a time of renewed global uncertainty triggered by the invasion of Ukraine by Russia.
He said while Nigeria continues to struggle with growth, exchange rate stability, liquidity and inflation, it is important that the FG prioritize the exchange rate over inflation.
Teriba said, “I was not expecting the CBN to claim to do anything about inflation as the cost-push inflation would die off after sometime. If it was demand-pull inflation, one will be talking about the CBN raising rates to reduce inflation. However, you cannot raise rates when growth remains weak nor can you cut rates when you have demand pressures in the FX market. What the CBN needs to consider is not to confine itself with several meetings which it comes to explain why it cannot act but to take strategic steps to boost the supply of FX in the country”.
He lamented that the government has continued to borrow to supplement spending and liquidity management, adding that the Ministry of Finance, CBN and the Debt Management Office (DMO) should look at ways of attracting foreign direct investments (FDIs) into the country to finance some of the things that the government is currently borrowing money for.
“So Eurobonds are debts, and FDIs are equities, butNigeria only issues debt instruments at home and abroad and can issue equity assets that we are trying to borrow to fund and offer equity ownership. This is perhaps the most reliable way open to countries around the world to ease liquidity, boost FX and stabilise the exchange rate. So it should not be difficult for the CBN to work with the Finance Ministry and DMO to think of equity opportunities.
We have a lot of assets but we do not have the money to fund them and so issue equity which could be 1 or 5 per cent which will bring FX liquidity into the country and put the CBN in a position that it can act. If they remain cautious all the time, then I am not sure of their decisions because it will look like one is barking when it ought to bite”, he said.