By Charles Nwaoguji
Despite sharing concerns of the Central Bank of Nigeria (CBN) on its monetary policy decisions, West African Institute for Financial and Economic Management (WAIFEM), has urged the apex bank to implement policies that would stimulate the economy rather than retaining its tightening stance.
The Director General of the institute, Prof. Akpan Ekpo, who stated this at the opening session of the regional course on “Banking Supervision, Intermediate Level,” organised by WAIFEM in collaboration with the College of Supervisors of the West African Monetary Zone (WAMZ), held recently in Lagos, urged the CBN to reconsider its stance on the current demand management model in the foreign exchange market.
Expo stated that this has collateral consequences for the economy, especially in the opaqueness of the foreign exchange management, even as it increases the vulnerability of the forex market to corrupt practices and distortions in the economy.
Ekpo, who was represented by the Director, Administration and Finance Department of WAIFEM, Mr. Euracklyn Williams, noted that the therapy of interminable monetary tightening has really not worked, adding that the protracted problem of excess liquidity should be addressed in a manner that would not persistently cause disruptions and dislocations in the economy.
He noted that the focus of the CBN has been on tackling the symptoms, not the cause, insisting that position of an imminent currency devaluation following an intensified speculative activities and round-tripping in the forex market.
The WAIFEM boss said the Federal Government needs to unfold its economic agenda to boost investors’ confidence and reduce uncertainty in the economy.
“We also share the submission of the apex bank that the Federal Government needs to unfold its economic agenda to boost investors’ confidence and reduce uncertainty in the economy, as monetary policy instruments need to be complemented with fiscal policies to achieve the desired economic outcome.
“The decision by the CBN to retain the current demand management models in the foreign exchange market reflects an ominous indifference of the apex bank to the plight of various stakeholders (including manufacturers) over its foreign exchange management strategy,” he said.
He stated that the nation is suffering from stagflation, a prelude to recession, stressing that all relevant macroeconomic and social indices show that the economy is in distress. The high rate of unemployment combined with reduced output in first quarter of 2016 suggests an economy in the sphere of stagflation, which is a prelude to recession.
Ekpo noted that the nation’s economy was at the verge of recession because the global environments, such as the slow growth in China and the sluggish recovery in Europe, have further worsened the already bad situation, noting that certain policies could cushion the effect of such a recession. He lamented that the cost of doing business in the country is still very high. “To provide power, the manufacturers spend a lot every year; just to provide electricity to run their plants.
“In advanced countries, even in some other developing countries, they are the things you take for granted. I am not sure that they will run their factory because they are not able to access forex to buy the raw materials they would need,” he added.