Top 15 Sarah Alade Quotes

The future of the Nigerian economy is very bright. The Economic Growth and Recovery Plan (ERRP) by the Federal Government with other complementary policies are set to propel the Nigerian economy out of the recession and move the economy forward. The broad government strategy of infrastructure development, structural reforms and investment in social safety nets are policies that will position the economy to a more inclusive and diversified growth.

The threat to CBN autonomy is also disturbing. Global best practice prescribes central banks’ independence to enhance policy coherence and sturdiness born out of freedom of vision and implementation space.

Then, there is the issue of monetary and fiscal policy coordination. Non- harmonization of monetary and fiscal policies is an issue of serious concern in the country because they complement each other. Monetary policy has a limit and whenever it reaches that limit, the only way out is for the fiscal authorities to intervene in the economy. So, in the absence of such coordination/harmonization between the two, a serious economic problem may arise.

Nigeria needs to deepen its financial sector as a whole. Deepening the financial sector entails improving financial structures to ensure efficient delivery of financial services to the private sector.

Financial illiteracy results in poor financial inclusion. Non-financial inclusion becomes a threat to the survival of the Nigerian financial sector as most adults and young Nigerians are financially excluded from the formal financial sector. A high percentage of adult Nigerians don’t have bank accounts, and this in the long run becomes a big headache for central banking.

Poor financial literacy is another. It is only when the vast majority of the Nigerian population is financially literate that they can participate in the formal financial system; the reverse is the case.

The challenges are many. Oil price volatility and the unstable global environment are major challenges for Central Banking in Nigeria as they are causing growth challenges and other spill-over effects for the local economy. Central Banking in Nigeria is faced with other enormous challenges such as the size of Nigeria’s informal sector. Globally, developing/emerging economies are characterized by a big informal sector which causes a lot of limitations to Monetary Policy implantation and coverage because a majority of the participants in the sector are not using formal financial services and so cannot be captured formally.

It is also expected that the fiscal authorities would provide direction and leadership while the monetary authorities would facilitate an enabling business environment conducive for growth. Nonetheless, the overriding mandate of the Bank continues to be price stability across the major price rates: inflation; loan interest; and foreign exchange. Stability in prices is essential for investment and consumption. Monetary policy can help through influencing short-term interest rate, but monetary policy alone is not enough to pull the country out of recession. Fiscal policy must come in and do its part to fully pull the economy out of recession.

Taking these factors together, the effect on the Nigerian economy has been the significant decline in the country’s foreign reserves, depreciation of the Naira and substantial increase in consumer prices. To reverse the trend and put the economy back on a path to economic recovery, significant effort is needed on the part of the Federal Government, especially harmonization of its fiscal and monetary policies to boost aggregate demand and investor confidence.

Nigeria’s economic recession can be traced to a number of global and domestic factors. They include slump in commodity prices, general slowdown in economic activity in developing countries, over dependency on oil, lack of diversification of the revenue base, consumption-led growth, militancy in the Niger-Delta region, insurgency in the North East and unutilized excess liquidity in the banking system.

A number of fiscal and monetary policy options have been deployed to end the recession and the efforts are yielding fruits as the recently released inflation figure shows that inflation is trending down after 15 months stretch of rising price level. The CBN is also working to increase supply of foreign exchange and boost liquidity in the interbank market to ease the scarcity of foreign exchange for the manufacture of goods and increase the level of production. On the part of the fiscal authority, efforts at broadening the revenue base and increasing the collection of taxes have been intensified and are yielding fruits.

In 2016, the Nigerian economy officially entered into recession, recording two consecutive quarters of negative GDP growth rates of 0.36 per cent and 2.06 per cent in the first and second quarters, respectively. For the full year of 2016, the real GDP contracted by 1.51 per cent. Achieving price stability has remained the priority objective of most central banks. However, given the high level of poverty and unemployment in most developing countries, it has become imperative for central banks to work hard at achieving price stability with growth.

The best way to ensure the desired economic growth and low inflation is economic diversification with a broadening of the revenue base. Reducing the import dependency will also help to curb the demand for dollar; thereby reducing general inflationary pressure.

The Organization for Economic Cooperation and Development (OECD) countries in 2008 recommended the imposition of some form of capital controls that at least restrain inflows of short-term funds, which the CBN has done. The CBN will also do well to stick to its statutory mandate of maintaining price stability for growth. This will go a long way in moderating inflation and stimulating growth in the long run.

For Nigeria, like most developing countries, policy has often times focused on the flexible exchange rate regime and financial integration, emphasizing monetary policy independence. However, as globalization, capital flows constraints and other adverse phenomena set in, it has become imperative to seek a convergence.