The eyes of several Nigerians, at least those who understand the basics behind economics and the economy, were in the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to see how it would swing in its latest policy meeting.
The pressure on the committee must have been palpable given that the National Bureau of Statistics had just released another report with a 2.24% contraction in Q3 leading to the first whispers of a depression. After the meeting, the MPC said that it had done nothing- rates were kept the same. If that was befuddling, then the reason the MPC gave for its actions was scary.
It admitted that its monetary policy tool has run out of options and that the economy could only get the needed support from effective implementation of fiscal policies. In other words, they are out of ideas. That the nation’s core monetary policy body has thrown in the towel should send danger signals to Nigerians. If they have run out of ideas, who would then steer the economy out of its current comatose state?
This sentiment is shared by Dr. Franklin Ngwu, a lecturer of Economics at the Lagos Business School who told Guardian “CBN’s statement sends a wrong signal to the economy…there is supposed to be proper synergy between the CBN and government to bring confidence to economic agents and investors”
Another problem that Ngwu highlighted is that “impression of exhaustion” given by the CBN shows that the CBN and fiscal policy makers are not prepared to work together to bring robust economic policies to address the current economic challenges.
Are these the first indications that the monetary and fiscal policy makers are at loggerheads? One cannot but remember at this point the eyebrows raised when the MPC decided to increase lending rates in direct contradiction to what the Minister of Finance had earlier subtly suggested. One prays that is not the case. One prays it is just as Emefiele suggested- accumulated debts have slowed business activities of economic agents; most of who are indebted to the banking system, thus compromising the integrity of the financial system.
But then, his next words hardly cover any of Nigeria’s economic policy makers in glory as he claims there is a “need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations”. What have they been busy doing all this while? Is not the framework supposed to be one of the first things agreed upon before policy implementation?
Whatever the reason for the lack of synergy between monetary and fiscal policy makers, the one thing that is certain is that, as Ngwu says, “there is an urgent need to rethink government policies especially the monetary, fiscal and supply side policies”
