AHEAD of the Monetary Policy Committee meeting scheduled to hold this week, economic management leaders from the Central Bank of Nigeria (CBN), ministries of Finance, Budget &National Planning as well as Trade and Investment, over the weekend, gathered in Abuja to harmonise their policy perspectives.
Speaking at the opening of a two-day MPC retreat at the CBN Corporate Headquarters in Abuja with the theme: “Pathway to Price Stability Conducive to Economic Growth,” CBN Governor, Mr. Godwin Emefiele, who convened the meeting, reiterated the need for monetary and fiscal authorities to collaborate and harmonize standpoints so as to develop the economy rapidly.
Emefiele, who also chairs the Monetary Policy Committee, said the MPC retreat, which for the first time had in attendance a large representation of the fiscal authorities, was coming at a period when the country faced serious economic challenges.
He added that finding a sustainable solution required a broadened participation of colleagues from the fiscal side.
He said that the retreat, as a brainstorming session, would provide perspectives on certain Monetary Policy Committee decisions.
He said it would also close the gap on the coordination between monetary and fiscal authorities to chart a common course and take decisions to develop the economy.
In his remarks at the brainstorming session, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, said both the monetary and fiscal authorities had no choice but to work together to guarantee the country’s economic growth.
He posited that the pathway to lower interest rate was to ensure monetary and fiscal authorities collaboration with the private sector.
Also speaking, the Minister of Finance, Mrs. Kemi Adeosun, and her Industry, Trade and Investment counterpart, Dr. Okechukwu Enelamah, both agreed that solving challenges facing the Nigerian economy required unconventional tactics.
Adeosun, while disclosing that there remained a huge number of unbanked Nigerians whose contributions to the economy are hardly captured, said the government must devise ways to bring them into the financial mainstream. She also hinted that based on the current realities, the Federal Government would have to borrow more to meet its infrastructural obligation.
On his part, Dr. Enelamah emphasized the need for both monetary and fiscal authorities to ensure business, market and investor confidence, as well as policy integrity, in order to improve on the ease of doing business in Nigeria.
In her presentation entitled: “The Macroeconomic Trilemma and Monetary Policy in Nigeria,” the Deputy Governor, Economic Policy, Central of Bank of Nigeria (CBN), Dr. (Mrs.) Sarah Alade, said the onus of achieving the trilemma of low interest and exchange rates as well as low inflation should not entirely be the function of the monetary authority.
Rather, she said it would require the collaboration of fiscal authorities.
According to her, there was need for deliberate policies to ensure stability and engender growth in the economy.
Meanwhile, two financial experts on Sunday expressed divergent views on whether the apex bank should retain or reduce the lending rate ahead of the Monetary Policy Committee (MPC) meeting this week.
The News Agency of Nigeria (NAN) reports that the MPC meeting had been scheduled to hold in Abuja between March 20 and 21.
In separate interviews with NAN in Lagos, one expert supported a reduction in the interest rate to grow small businesses, while the other called for its retention, citing liquidity challenges.
According to Prof. Sherrifdeen Tella, a Senior Economist at the Olabisi Onabanjo University, Ago-Iwoye, Ogun, the current high lending rate portends great danger for the economy.
Tella said that a lower interest rate would allow the private sector to borrow money competitively.
He explained that encouraging a savings culture could only be brought about by the availability of income.
“When the lending rate is high, banks prefer to sell bonds and treasury bills.
“We continue to appeal to the CBN to listen to our cry for the reduction of the interest rate for the overall good of the economy, especially small businesses,’’ Tella said.
On his part, Dr Chijioke Mgbame, Associate Professor of Accounting, University of Benin, said that the CBN should retain the lending rate because of the liquidity problem in the economy.
Mgbame noted that addressing the nation’s economic problems “defy an economic model’’ because of the different interests manipulating the economy.
“Sometimes we need some abnormal policies to correct the problems of the economy,’’ Mgbame said.
He explained that since the economy was witnessing some level of recovery, he expected the CBN to keep up the momentum and retain some of the monetary policy parameters.
NAN reports that the CBN rose from its last MPC meeting on Jan. 24, retaining the Monetary Policy Ratio (MPR) at 14 per cent, alongside other monetary policy parameters.
Its resolution came in spite of appeals by experts to lower the MPR or lending rate to stimulate the economy.