We are in an era of economic uncertainties that characterised the post COVID-19 pandemic.The global economy currently is in a revers gear courtesy. Brunt inflation,stock depreciation,and rising public and private debts both in developed and developing countries.
In the meantime, the Russia-Ukrain war that depict a persistent power in the use of strategic military weapons by the warring parties. Unfortunately, is causing crunch and disruption in production chains. Leading to bumps of disarticulation of goods and services. And ardently also disconcerting the fragile equilibrium amid supply and demand to a soaring food and energy prices.Sadly, the alarm bells of looming food scarcity and hunger confront us all.
Instructively, developed and developing nations through the instrumentality of fiscal and monetary policies.Clearly, are doing every thing possible to contends the eminent danger.
In this regards Central Banks across the world are in the race with tightening measures to confront the qualms that envelop the global economy.This comes in orchestrated mode, by monetary authorities raising interest rates in a bid to tame soaring inflation, which, much to their dismay, continues unabated on monthly basis.
The Nigerian state monetary authority is not left out in this economy combat. In a fight against inflation and other myriads econonmy challenges.
However, a recent World Bank Report about the Central Bank of Nigeria (CBN) management of the economy.Punctured, the apex bank monetary policies.Raising alarms about the huge risked to further distabilised the anticipated economic growth.
The Washinton based global lender revealed this in its “Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual”.This neoliberal institution was very direct as it accused the CBN policies on multiple exchange rates, trade restrictions, and the financing of the public deficit as the reasons behind the poor business environment in the country.
The World Bank further added that the CBN meaures are” business-as-usual policy stance that hinders prospects for economic growth and job creation”.
In this regards, the World Bank see this initiatives too poor amid heightened risks it posed to the economy.
Interestingly, before and after the COVID-19 pandemic. The Nigerian apex bank in what it consider as a shift in monetary policy measures.Under,the current management find comfort and confidence enough to grow the economy by deploring and engaging in “Heterodox monetary strategy”. Heterodox monetary stance in the thinking of the apex bank managers is believe would ensure.
A steadfastness to correct valuation of the naira under transparent exchange rate regime, improved export earning as well as price stability and employment generation.
Cheifly, with the CBN Act of 2007 and been a public institutions of a unique nature: they are independent, non-commercial entities tasked with managing the currency of a country.
They have exclusive powers to issue banknotes and coins, control foreign reserves, act as emergency lenders and guarantee the good health of the financial system.The CBN in this case prime mission is to ensure price stability. This means they need to control both inflation – when prices go up – and deflation – when prices go down.
Nevertheless, in what look more damaging to the CBN dogger head to fight inflation of which the Britton Woods bank consider ineffective.
It said the “Central Bank of Nigeria’s development finance intervention is fuelling inflation in the short term and weakening the ability of the apex bank to control inflation”.
It noted also that “CBN’s continued provision of subsidised funding to certain sectors has to slow down as it is undermining the ability of commercial banks to lend on a risk-adjusted pricing basis. And added that the apex bank’s disbursement in the private sector as its share of private sector credit rose from 6.5 per cent in 2019 to 10 per cent in 2021”.
Although, from the foregoing we can objectively dissect the concerns of World Bank.With hindsight on the current situation.The Nigerian economy is struggling and the naira has come under the weight of foreign currencies.
For instance,the growth rate declined by -1.8% in 2020, grew by 3.4% in 2021 and is projected to maintain the pace with 3.11% Q1 2022.Painfully, the economy endures a high inflation rate of 15.9% in March 2022 and a high unemployment rate of 33.3% Q1 2022.
Without missing words, value of the naira has depreciated from N360/dollar in 2019 to N580/dollar in 2022 with parallel market exchange rate fallen by 61%. Sadly the national reserve decreased to $39 billion as of April 2022.
Inflation has gone up by 39.5% with no decreasing. In the same vein, external and domestic debt stocks continuel to flunctuates amid $38 billion and $45 billion US dollar respectively since 2019 till date.
Furthermore, the bank reminded us that “Notably, during 2020 and 2021, when oil prices were much lower, the government lost an opportunity to address one of the primary sources of fiscal vulnerability by choosing to maintain the subsidy for premium motor spirit, more commonly known as petrol—a subsidy that is unique, opaque, costly, unsustainable, harmful, and unfair.”
Conspicously, the bank express it worries over the continuel subsidy regime by alluding that “Due to the petrol subsidy and low oil production, Nigeria faces a potential fiscal timebomb.”
On a serious note, the neoliberal global lender kick against, CBN’s low-interest loans interventions of 5% per annum interest rate.It consider to undermines commercial banks that lend on a risk-adjusted pricing basis.This in the view of the bank is akin to a subsidy as the loans original. Even though it attract 9% per annually compared to high rates charged by commercial banks.
Nevertheless, the global lender recognizes the significance of the CBN intervention “programmes to support micro, small, and medium enterprises is a priority to protect viable and vulnerable MSMEs against rising uncertainty”
But what exactly is the rationale behind the World Bank diaparagement about the CBN policies and the Nigerian state non removal of subsidy. Although we need not remind our self that this Washington Consensus Institution have been around for a long time.And it remains the custodian of Neoliberal Orthodox Economic Practices since the 1970s-80s.It various prescriptions on global economy.Notably, informed there loans and financial initiatives popularly refers to as Structural Adjustment Programmes (SAP).
Nigeria experiences with the World Bank date back to late 1980s.Off which its diagnosis the Nigeria economy using the neoliberal lenses.
Apparantly, the World Bank picking holes in CBN heterodox policy at this point is not surprising. At lease with the refusal of the apex bank’s decision not to devalue the naira and opposition stance on subsidy removal.
Nonetheless,the Nigeria economy is not appreciating,and this we can understand results from the structural deficits of many years.
So what could be the way out,because World Bank report have not said anything new.We are all living witness to the pathetic economic reality.As it stand the CBN must keep its goal to continuel supporting the real sector for economic growth.
Another, is for the CBN not to loss focus
in addressing micro and macroeconomic vulnerabilities that is pushing millions of Nigerians into extrem poverty.
Lastly, is re-present Late Sir Henry Boyo objective suggestion on saving the Naira through “liberalisation of the foreign exchange market and the introduction of dollar certificates as payment to statutory beneficiaries”.
This in his view would critically help in not just taking away the pressure on the naira. But Stabilise accumulates foreign exchange revenue from crude oil.
Augment public investment in human capital development, infrastructure and production.Instead of using it on debt financing at high-interest rates.
Consequent is improving the value of the naira.
Adefolarin A. Olamilekan
Political Economist and Development Researcher.He can reached via:
Email: [email protected]
Tel:08107407870.08073814436
