CBN Deputy Governor, Aishah Ahmad partook in her first Monetary Policy Meeting last April. Her appointment by President Buhari surprised a lot of policy analysts and economist, so it is not surprising that the attention was on her statement in the monetary policy communique.
The CBN released its Communique which included full statements of committee members on May 3rd 2018 giving us an insight into how the new Deputy CBN Governor’s view of the economy.
We picked out some key nuggets.
Her views on the effect of higher oil prices on the external reserves.
“These positive growth prospects and likely renewal of the OPEC production cap agreement is expected to support increased aggregate demand and higher prices for crude oil. This is good for Nigeria, given the significant impact of oil prices on our economic fortunes. Indeed, rising crude oil prices through 2017 and in Q1 of 2018.
Bonny Light prices which rose from US$65.40/b in December 2017 to US$69.11/b in March 2018 have helped to grow the reserves and stabilize the exchange rate.”
It wasn’t all gloomy though. She had her reservations
“A few downside risks to global growth, however, have mixed implications for the Nigerian economy, so also are the uncertainty over the BREXIT negotiations, tensions over North Korea, US protectionist trade policy and the brewing trade war, growing investments in shale oil production and monetary policy normalization in the advanced economies.”
She also actually seems to have a knack for playing safe, often balancing her optimism with pessimism. Just like she did above, she also did same in the excerpts below;
“Following its exit from recession in Q2 2017, the Nigerian economy grew by 0.83 per cent in 2017 compared with -1.57 percent contraction recorded in 2016, due to improved crude oil production and rising prices, deliberate macroeconomic stimulus and a relatively stable naira.
This is further supported by the positive outlook for the Nigerian economy with World Bank 29 and IMF projections of 2.5 per cent and 2.1 per cent GDP growth in 2018, respectively. However, it is important to note that GDP per capita continues to decline, given higher population growth compared with output growth rates.”
“Notwithstanding the foregoing positive developments, the economy remains exposed to potential global economic headwinds, whilst high lending rates and low private sector credit growth threatens the fragile recovery in domestic output.”
“Despite the relatively strong balance sheets of deposit money banks and the stable outlook, the high and rising non-performing loans concentrated in a few sectors is worrisome. Whilst macro-prudential measures being
implemented by the CBN are helping to proactively manage this risk, a
stronger and resilient economic recovery remains crucial to reversing this
Here, she recounts the age-old theme of “diversification” of the Nigerian Economy. While stating the obvious it is refreshing to know she vehemently believes Nigeria’s short terms recovery is hinged largely on oil.
“Nigeria’s exposure to volatilities in crude oil prices remains a concern –
Building fiscal buffers and sustained efforts at revenue, economic and export diversification remains paramount in view of volatilities in crude oil prices.
This underscores the importance of ongoing efforts of the fiscal authorities towards economic and revenue diversification, such as the recent inauguration of the National Food Security Council and the implementation of Voluntary Asset and Income Declaration Scheme(VAIDS).”
And she had a strong message to politicians
“The anticipated huge fiscal spending for the proposed 2018 budget and preparations ahead of the 2019 elections may also have inflationary effects. This in itself would obviously call for a proactive and cautious monetary policy response to ensure there is no upward pressure on inflation.
Thus, I would encourage quick passage of the 2018 Appropriation Bill by the National Assembly, to keep fiscal policy on track, boost investment, employment and economic output for the benefit of the citizenry.”
Reading through the 1,073-word commentary from Aishah, we can only infer that she appears to be a coy on the trajectory of the Nigerian economy. Unlike the likes of Abdul Ganiyu-Garba or Doyin Salami, who were independents in the committee, she appears to be uncertain about her economic ideology as demonstrated in this remark;
“It is my opinion that monetary policy considerations at this time should prioritize reduction in the general price level, exchange rate stability, and sustaining the fragile economic growth. We must – while we still can –encourage the positive momentum in capital flows and accretion to reserves, while accelerating the downward inflation trajectory.”
Like the CBN Governor, she seems to be an advocate for exchange rate stability driven by a quasi-free float of the Naira and enabled by a strong external reserve. We are also not surprised by her vote as previous CBN Deputy Governors hardly vote against the CBN Governor.
Do not expect Aishah to support a CBN that will allow our reserves to be used to fund imports restricted by the ban of 41 items. She is no maverick!