By Isaac Anumihe
Nigeria Employers Consultative Association (NECA) has decried the Central Bank of Nigeria’s (CBN) tight monetary policy during a recession, saying that the approach was sub-optimal and has failed.
Briefing newsmen in Lagos, the president of the association, Mr Larry Ettah, said that the correct posture in a recession is a reflationary fiscal policy, monetary easing and reduction of interest rates.
He said that the apex bank based its policy on an erroneous assumption that tight monetary policy would constrain inflation and temper pressures on the naira.
“Instead, the actual experience confirms that Nigerian inflation is driven by cost elements usually currency devaluation and food and energy prices while naira values are shaped by oil prices and foreign exchange reserves rather than monetary conditions, especially as CBN has maintained administrative control of the currency value” he said.
According him, manufacturers and other employers of labour are forced to cope with a triple whammy of recession, high inflation and high interest rates caused by the wrong policy choices made by the monetary authorities.
Against this background, Ettah called on CBN to lower interest rates and reduce the monetary policy rate (MPR) which has been kept at 14 per cent since July 2016. The NECA president also condemned the phenomenon of crowding out of private sector access to credit by credit to government.
“Data from the CBN demonstrates that credit expansion to government is outgrowing by large margins credit to the private sector. For example, between February and April 2017, while credit to government grew by 3.10 per cent, 27.81per cent and 7.54 per cent respectively while private sector credit grew marginally in February by 0.10 per cent; declined by 1.89 per cent in March; and also declined by 1.48 per cent in April on a month-on-month basis. On a year-on-year basis, credit to government expanded by 15.43 per cent, 19.76 per cent, 37.46 per cent and 42.15 per cent in January to April 2017 while private sector credit grew only 19.76 per cent, 19.17 per cent, 17.96 per cent and 13.23 per cent in the same period” he said.
The president observed that unemployment rose to 14.2 per cent in Q4, 2016 with National Bureau of Statistics (NBS) reporting that 3.4 million people lost their jobs in 2016. Growing unemployment, he said, is directly attributable to erstwhile policy gaps as well as flawed foreign exchange policies that constrained the productive sector.
Ettah , however, hailed the Acting President, the Minister of Industry, Trade and Investment and the Presidential Enabling Business Council (PEBEC) for the progress made in the enabling environment reforms under the ERGP.