As The Fiscal And Monetary Policies Clicks, By Nasiru Suwaid
Recently, many a financial reporter, a financial industry player and indeed, a financial system aficionado, have secretly pondered and even openly wondered, need I say complained, about the creeping loss of independence of the Nigeria’s apex bank, the Central Bank of Nigeria. Their fear is premised and based on the robust cum rational position of the government, regarding the roaring debate on the devaluation or otherwise of the national currency; the naira and have often expressed concern, even fears, in the seeming meddling into the established functions of the apex bank, to lay out the monetary policy of the government, indeed, some have resorted to questioning the independence of the banker’s bank.
But, the President Muhammadu Buhari (PMB) administration is quite aware of the fact that the position of the Central Bank of Nigeria, as the body constitutionally established to set the monetary policy instruments of the Nigerian state and by its core functions, its policy initiatives should transcend, the limited tenure and duration of an elected government. In fact, the fact that the government inherited the central bank governor, yet, it did not try to exceed its powers by seeking a replacement, which says a lot about its democratic nature and its respect for the rule of law, though, it is not unique to Nigeria, as a newly elected President Barack Obama, also inherited Ben Bernanke as Chairman of the Federal Reserve in the year 2008.
And, despite his open fraternizing with the Republican congressmen, the party which initially appointed him into office and his ‘inappropriate’ activist role, in encroaching into purely fiscal policy matters of seeking to balance the budget, when he invented the term ‘Fiscal Clip’, President Obama still tolerated him, because of his respect for the boundaries of powers, entrenched in the United States Constitution (USC). It is a known fact to everyone that President Muhammadu Buhari (PMB) came into power, with certain policy pronouncements and promises, which entail and include low interest rates to stimulate growth and measured liquidity ratio within the financial system, which would keep inflation at very low level and in single digits.
It is because of this reality, that the implementation of The Single Treasury Account (TSA), was immediately followed with the reduction in the Credit Rate Ratio (CRR) in commercial banks, from 25% percentage point to 20% percentage point. Which has left the banks awash with so much funds, that the Interbank Rates (IBR) has been near !% percentage point, since the beginning of the year and such liquidity is enough to make the banks to bring down Interest Rates (IR), but, they have simply refused to do it. In fact, it is this excess liquidity in the financial system, which has been threatening the naira, while the apex banks mechanism for mopping up excess liquidity through government bonds, is always counter balanced by the maturity of matured financial instruments.
But, the recent statement of the deputy governor of the central bank at the National Assembly, that with the passage of the budget, the apex is going to aggressively tackle excess liquidity, would further bring stability to the naira and the ‘captured’ foreign currencies, laying ‘idle’ in the Domiciliary Accounts of commercial banks, should serve as a buffer and determinant, on the quantum of need or otherwise by Nigerians, regarding access to Forex for productive enterprise.
And this two other things:
WHY BEGRUDGE THE ROUTE GOVERNMENT HAS TAKEN
It is often stated, it is not about the route taken to reach a place, what always matters is reaching the destination, if that is the case, why should those who seek the devaluation of the naira, be against the position of President Muhammadu Buhari (PMB). Both the two sides, have premised their position, only, on the demand side management of the foreign exchange, as while the Buhari position, maintain the status of the naira, only on the official rate of N199 naira to 1 US dollar, but, it is exclusive of imports of consumables and consumption of foreign goods, as such, for these group of Nigerians, they are to access the naira at devalued black market rates. On the other side, they seek a devalued naira, to all imports, whether for acquisition of value adding and imports substitution raw materials for production or for mere consumption of finished imports.
The idea for both sides is purely demand management of forex, having a lower rate for the naira, to serve as a disincentive for seeking to acquire it, but, the Buhari position, at least, subsidizes production. Regarding the claim that a devalued naira, would also impact supply side management of Forex, by attracting its import into the Nigerian economy, at least for profit motive, it is a pure fallacy, because, the deposition by the Deputy Governor of the Central Bank of Nigeria at the National Assembly, has put paid to that, when he proclaimed that over twenty billion dollars lay dormant in the Domiciliary Accounts of Nigerian banks.
Beside, according to Bloomberg Business News, since the beginning of 2016, the dollar has appreciated by 11%, against other competing global currencies, in fact, in a time of global economic slowdown and financial uncertainty, investors hardly invest in stock markets, which is confirmed by the universal sell off of shares from NASDAQ to NSE and the price of gold, an alternative article for saving also remains low, because, for the generality of people, they would rather hold on to their dollar, tight.
THAT AGBAKOGBA DECLARATION
It was in the beginning of this week, the former Chairman of the Nigerian Bar Association (NBA), caused a screaming headline in one of the national dailies, with a caption: Nigeria is now in a Recession, Depression. At first, I took it most seriously and in fact, I was very alarmed, so, I checked the body content of the report, whether the erudite legal luminary was speaking on behalf of the Nigerian Economic Summit Group (NESG) or even the National Bureau for Statistics (NBS), but, he spoke for neither of them or even any established economic agency or amalgamation, rather, it is just a personal expression of concern.
However, what stuck on my mind, was that it was the same character, who in the previous week, was in the press, extolling the virtues of the leading Republican Party contender, Mr. Donald Trump, openly wondering why Nigeria is not so blessed, as to have such a sagacious businessman as president, and, from there on, my mind become rested, because, if Chief Olisa Agbakogba (SAN) is now a financial expert, having the powers to make epochal national declarations, then Mr. Donald Trump is neither a racist bigot nor a prejudiced anti-immigrants.
Follow me on twitter: @neeswaid