More Forex And Lower Inflation Will Provide Relief — CBN, NESG

The Central Bank of Nigeria, CBN, the Nigeria Economic Summit Group (NESG), along with the World Bank, the International Monetary Fund (IMF) and economy experts yesterday indicated that the Nigerian economy will achieve some stability leading to a reduction in the inflation rate, unemployment and poverty.

CBN Governor, Mr Olayemi Cardoso, speaking at the launch of the NESG 2024 Macroeconomic Outlook, hinted that Nigerian will heave a sigh of relief from the sustained rise in prices of goods and services when the implementation of its inflation targeting policy, measures to improve liquidity in the forex market as well as expected reduction pump price of petroleum products begin to yield impacts.

Consequently, the CBN projected these measures will trigger improved productivity in the agricultural sector and a reduction in the inflation rate to 21.4 per cent in 2024.

Meanwhile, the NESG projected a decline in unemployment to 5.0%, while the poverty level reduces to 41.5 per cent, if implementation succeeds in a combination of ongoing reforms and other measures outlined it its Economic Transformation Roadmap.

These measures, according to the NSEG, will help the economy achieve Gross Domestic Product, GDP, growth of 3.5 per cent, an increase in external reserves to $40 billion, decline in inflation to 21.5 per cent while the exchange rate will stabilize at N900 per dollar in the official forex market.

Titled, “Economic Transformation Roadmap: Medium Term Policy Priorities”, the NESG 2024 Macroeconomic Outlook, outlined three phases that will lead to enhanced socioeconomic well-being of Nigerians.

Speaking in this regard, Chairman, NESG, Mr. Niyi Yusuf, stated: “Building on the NESG #NES29 theme, “Pathways for Sustainable Economic Transformation and Inclusion”, this year’s macroeconomic outlook underscores “Medium-term Policy Priorities” to expedite the transformation process and enhance the socio-economic well-being of Nigerians.

“The Economic Transformation Roadmap outlines three phases of policy sequencing, focusing on monetary stability, effective fiscal management, local content improvement, domestic productivity enhancement, incentives to motivate private sector investments, and human, social, and natural capital development.

“As we delve into these policy priorities, we must emphasise the pivotal role of a robust policy environment in laying the foundation for sustainable Macroeconomic stability and “economic transformation.

“We recognize the current administration’s efforts in stabilizing the economy, but given the depth of the problems, more still needs to be done and quickly too. We must not relent to build the Nigeria of our dreams. I implore every stakeholder to rise to this occasion and contribute to our quota in rebuilding our economy.

“The Nigerian Economic Summit Group (NESG) stands ready to continue its collaborative efforts with the Federal and subnational governments to achieve these transformative goals. A concerted and coordinated approach and effective policy implementation will propel Nigeria towards a more resilient, inclusive and prosperous future.”

CBN Outlines 2024 Agenda

Outlining the targets for 2024, Cardoso stated: “The anticipated moderation in pump prices of Premium Motor Spirit (PMS) due to the expected operational status of the country’s key Government and privately-owned refineries in 2024 is a pivotal factor in the economic equation. “The expected stabilisation or reduction in fuel costs is poised to have far-reaching implications across various sectors, contributing significantly to overall economic efficiency and resilience.

“Inflationary pressures are expected to decline in 2024 due to the CBN’s inflation-targeting policy, which aims to rein in inflation to 21.4 percent. This will be aided by improved agricultural productivity and the easing of global supply chain pressures, benefiting businesses by boosting consumer confidence and purchasing power.

“The CBN’s adoption of the inflation-targeting framework involves clear communication, use of monetary policy instruments, and collaboration with fiscal authorities to achieve price stability, fostering market confidence and positively influencing consumer behaviour.

“The outlook for decreasing inflation in 2024 will have a profound impact on businesses, providing a more predictable cost environment and potentially leading to lowered policy rates, stimulating investment, fueling growth, and creating job opportunities.

“Additionally, the Bank has reverted to the conventional monetary policy approach with a focus on attaining price stability, which fosters sustainable economic growth for Nigeria.”

Cardoso also assured that the apex bank is making efforts to boost liquidity and transparency in the forex market with the aim of ensuring fair exchange rate of the naira and confidence of global investors.

He said: “Our initiatives on FX, am pleased to note our collaboration with Ministry of Finance and NNPC to ensure that all FX inflow are returned to the CBN

“This coordinated effort will greatly enhance the Bank’s FX flow and contribute to accretion of reserves.

“The expected stability of FX market in 2024 can be attributes to the expected to the expected reduction in petroleum products import and the recent implementation of the market determined exchange rate policy by the CBN

“This reform is designed to streamline and unify forex rates fostering transparency and reducing opportunities for arbitrage.

“The resulting consistent and stable exchange rate will not only boost investor confidence but also attracting foreign investment, elevating Nigeria’s appeal to global investors.

“We are implementing a comprehensive strategy to improve liquidity in our FX market in the short, medium and long term

“Our focus is on addressing fundamental issues that have hindered the effective operations of our market over the years.
“Upholding the integrity of financial markets is crucial for building confidence.

“With the completion of an independent forensic review, we are addressing the backlog of valid FX transactions and we remain steadfast in our commitment to decisively address any infraction and abuses.

“In our efforts to stabilise the exchange rate, it is important that we prioritise transparency and create a market environment that enables a fair determination of exchange rates, ensure stability for businesses and individuals alike

“We believe that the Naira is currently undervalued and couples with coordinated measures with the Fiscal side we will expedite genuine price discovery in the near term.

“This coordinated approach will contribute to a balanced and stable exchange rate”.

It’s Been A Difficult Ride So far – World Bank

Sharing the same optimism, Nigeria’s Lead Economist, World Bank Group, Dr. Alex Sienaert, said that Nigeria is on the start of the road to transformation with some of the policy initiatives that have been taken by the Federal Government.

Speaking during the panel discussion on the NESG report, Sienaert said: “Fuel subsidies have been removed. There’s been a move to reform the exchange rate, but still, when the government came in, they moved fantastically in terms of all the energy and great information that’s been shared so much already.

“I think it’s a very central question to the perspective of stabilization, which is the starting point of the report we’re discussing today, I think and rightly so, it relates with the latest report that we at the World Bank put out on the economy just about a month ago, which was entitled ‘Turning the Corner’.

This NSG report has the idea of a roadmap to transformation. So our perspective is, maybe, that we’re on the start of this road to transformation. We’re turning that sort of first corner, and it’s been a difficult ride so far.

“We heard this morning how 2023 was a tough year. I think it’s just kind of standing back and recognizing the distance that’s already been travelled, the tough decisions that have been taken, as the CBN Governor mentioned. It’s hard to reorient policy to the extent that has already been done.

“And then the question becomes, if you’ve made those hard decisions, and embarked on a journey in the new direction, how do you consolidate and bring that down in such a way that you achieve the gains you’re looking for from having made those difficult calls?

Nigeria Facing Important Policy Trade Off – IMF

Speaking at the panel session, Country Representative, International Monetary Fund, IMF, Dr Christian H. Ebeke, said that Nigeria needs reforms that will jumpstart economic growth.

He stated: “Nigeria is facing a lot of critical challenges, and the way we have to think about structural reforms in an environment where the country is facing important policy trade off; it’s really a new thinking. You have to think about the reforms that will have a positive impact on the economy taking into account existing policy trade off. It is no longer the traditional structural reform agenda where you want to leave productive growth in a medium term and you start deploying labour market reform. You have to prioritise the reform that will have three major characteristics; One that have to jumpstart growth very fast because you need the reform with speed. You have to sequence these reforms and bundle them in packages so that you maximise the impact they will have.”

To sustain additional reform, he said: “Giving the social challenges that the population faces, you need reform; right reform that will have an impact, pretty fast to jumpstart the economy, then you have to sequence these reform pretty well. So you have to bundle them in packages. So that you increase or you maximise the impact that they will have. So the sequencing, the second test is very necessary. And then you also have to make sure that the reform that you put in place will be interacting with a policy that is consistent.

“Stabilisation is also very important and how these reforms interact with the people; unfortunately it has to be given the challenges they face is high inflation, high interest rate. We should focus on structural reforms and also governance issue. When you combine governance reform and structural reforms together the better. What we found in that report is that the combination of these three before; so it’s no longer that you have to wait four years because usually policymakers wanted to reform the economy because The benefits are uncertain and materialise after a couple of years.”

On agriculture and its potential, Ebeke said: “On agriculture, it is important to move up that sector which the report has included. There is a lot of talk about the need to transition to mechanise agriculture, but the machines that you’re going to use, you have to import them because we don’t build them here. And then in advanced economies, agriculture is less than like one or two percent of GDP. So do you really believe that we have enough time to boost productivity that is required? Nigeria does not even that time to wait for longtime .

“ There is need for fiscal and monetary consolidation in order to address the domestic imbalances. Inflation targeting in a credible manner with tightening policy. Effort from the fiscal authority is not to work against the monetary tightening but to work on boosting production and socio economic activities.

Structural factors are affecting the monetary policy; it is difficult to have fair rate of the exchange rate when the country is in consolidating phase. Nigeria needs tightening and boosting of the forex narket. Policy response is very important also. In their thinking monetary authority believe the challenge will just fizzle out on its own.”

On how to bring the informal sector to the formal sector he stated that the perception of the people is that if they come to the formal sector there will be tax pressure. He stressed that the multiple tax system is the major concern. “The government does not need to use force to bring them to the formal sector. The government needs to provide the incentives to them that will make them attractive and boost their businesses. Once that is done, the people will be concerned and be interested to come in because of the see the result” he added.

We Have To Transition From Passive Interventionism – Sagagi

Also speaking at the panel, former Vice Chairman, Presidential Economic Advisory Council, Dr. Muhammad Sagagi, said the quest to economic transformation also requires the need to strike a balance between protecting the domestic industries and unrestrained openness of the economy.

He stated: “We have to transition from a regime of passive interventionism into something that is a more open, even if guided, market system.

“Over time, we have seen that interventionist policies in this country, meddlesomeness in the economy, have led to where we are today.
“It is true that in the past, protection had supported Nigeria to grow, not only the economy, but, especially, the industrial sector.

“But if Nigeria aspires to realize its potential, to be a global player, to lead the continent, we must endeavour to open the economy and leverage private capital, private skills, and private sector technology. This is the path that Nigeria must take.

“But I want to caution that unrestrained openness of the economy can be as detrimental to us as blanket protectionism.
“We have to guide the market. But that guidance must be judicious and must be responsible.

“Therefore, I think, we must seek to create that balance. Strike that balance to maximise and restrict openness in the economic system.”

Need To Integrate Inclusive Devt – Osasuyi

Also speaking at the event, the Executive Director, Policy Innovation Centre, NESG, Dr. Osasuyi Dirisu, stressed the need to integrate inclusive development into the economic transformation agenda.

Osasuyi noted that policy makers need to view conversations about economic transformation as conversations that have to happen at the same time with inclusive development.

She said: “To avoid a situation where we come back and have these conversations over and over again, we need to begin to view conversations about economic transformation as conversations that have to happen at the same time with inclusive development not after. This is because sometimes we have all these conversations, we put down the projections and they look good on paper but when you go out to the street, how do you want the common man for example to listen to even a simplified version of these conversations.

Credit: Vanguard