Reform foreign exchange market to stabilize rate, reduce volatility, CPPE urges FG

The Centre for the Promotion Of Private Enterprise (CPPE), an economic and business advocacy think tank has advised the federal government to reform the foreign exchange market to stabilize the exchange rate, reduce volatility and stimulate forex inflows.

This came on the heels of the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) on Tuesday in Abuja where the Monetary Policy Rate (MPR) was raised to 13.5 per cent.

This makes it the first time the CBN would increase its MPR since September 2020 when it was pegged at 12.5 per cent.

In a statement signed by its CEO, Muda Yusuf, the think tank said the meeting’s outcome was “not unexpected having regard to the intense inflationary pressures, the increasing risks to price stability and the policy tightening trend by central banks globally”.

It further stated that the numerous economic headwinds like the surge in commodity prices and impact on energy cost, a spike in domestic liquidity from electioneering related spending and global supply chain disruptions have “posed significant risks to this critical CBN objective”.

The hike in MPR by 150 basis points to 13 per cent by the MPC is therefore understandable, it stated, but doubted whether it would significantly impact inflation.

The think tank, therefore, recommended addressing forex liquidity issues through appropriate policy measures, the security concerns causing disruption to agricultural activities and fixing the structural problems to boost productivity and competitiveness of domestic firms to curb inflation inflation.

Other measures it recommended include, “address the challenge of high transportation and logistics cost, reduce fiscal deficit monetization to minimize the incidence of high-powered money in the economy and manage climate change consequences to reduce flooding and desertification.

“Ensure the restoration of normalcy and good order at the nation’s ports to reduce transaction costs, reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of the sharp depreciation in the exchange rate, address concerns around high energy cost and create an investment-friendly tax environment to boost investments and output in the economy,” said Dr Adesina.

The AfDB President outlined the Bank’s plans to address the looming food crisis threatening Africa as a result of the war between Ukraine and Russia.

“I’m optimistic. Africa will not experience a food crisis. We have the means to overcome this challenge!” Adesina said.

He was briefing journalists from 41 countries in Africa and around the world at a media breakfast held to mark the start of the African Development Bank Group’s Annual Meetings, being held in Accra from 23 to 27 May.

“Africa needs only to produce its own food. It should not have to be begging for food. There is no dignity in begging for food,” he added.

The President explained all the efforts made and results achieved in terms of resilient agriculture in East Africa, thanks to the Bank, especially in Sudan and Ethiopia, which have been able to avoid importing wheat thanks to record production of 650,000 tonnes.

He highlighted the importance of the Technologies for African Agricultural Transformation (TAAT) programme for African producers’ resilience.

Dr. Adesina pointed out that the Bank Group’s Board of Directors had on Friday approved the $1.5 billion African Emergency Food Production Facility, developed by the institution to address the food crisis looming over Africa due to the Russia-Ukraine conflict.

The facility will provide agricultural seeds to 20 million African producers, and the varieties include wheat, maize, rice and soybeans.

The objective, he said is to produce an additional 38 million tonnes of food and to generate $12 billion in value over the next two years.

“In agriculture, we know what we’re doing. Africa must be a solution for the world in respect of food, and so it shall be. Sixty-five per cent of African land is arable, and the use that Africa makes of this land will determine the future of the entire planet. I’m optimistic. Africa will not experience a food crisis,”Adesina said.

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