President Muhammadu Buhari has risen to the defence of the Central Bank of Nigeria’s monetary policy actions despite the inflation rate at 17.7% and the Naira continuing to plunge in the black market.
The president disclosed this in an interview with Bloomberg, where he expressed confidence in the apex bank’s ability to tackle Nigeria’s economic problems and also gave a reason for not removing fuel subsidy as earlier planned.
This comes after the World Bank released a report stating that the multiple exchange rates, trade restrictions, and the financing of the public deficit continue to damage the business environment. The Bank also, stated that the CBN’s low-interest loans undermines commercial banks that lend on a risk-adjusted pricing basis and needs to be dialled down
What President Buhari is saying
When asked why he refused to heeded the call by the World Bank and IMF to remove the fuel subsidy and to unify the exchange rate. President Muhammadu Buhari said “most western countries are today implementing fuel subsidies. Why would we remove ours now? What is good for the goose is good for the gander!”
“What our western allies are learning the hard way is what looks good on paper and the human consequences are two different things. My government set in motion plans to remove the subsidy late last year. After further consultation with stakeholders, and as events unfolded this year, such a move became increasingly untenable. Boosting internal production for refined products shall also help,” he added
The president showed optimism around forthcoming projects and stated that Nigeria’s exchange rate was able to handle shocks.
He said “Capacity is due to step up markedly later this year and next, as private players and modular refineries (Dangote Refinery, BUA Group Refinery, Waltersmith Refinery) come on board. The exchange rate is still susceptible to external shocks that can suddenly and severely affect Nigerian citizens. As we step up domestic production – both in fuel (enabled by PIA) and food (agricultural policies) – the inflationary threat shall diminish, and we can move toward unification.”
When asked if he was concerned about the debate around the central bank’s independence following the governor showing interest in running for president. he said, “The CBN governor is appointed by the President. But this appointment is subject to confirmation by the Nigerian Senate. Ultimately, it will be for the CBN’s board of directors to determine whether a CBN governor’s actions have fallen foul of the laws in place to ensure he can most effectively carry out his duties.
“But there is a subtext to the accusations. Because the governor follows a model outside of the economic orthodoxy, he is labelled political. But the orthodoxy has proved wrong time and again.”
The president said Emefiele is following an alternative economic model, which Nigeria should be free to adopt.
He said, “Instead, the governor is following an alternative economic model that puts people at the heart of policy. Nigeria should be free to choose its development model and how to construct our economy, so it functions for Nigerians.”
What you should know
- Nigeria’s inflation rose to its highest level in 11 months, rising from 16.82% recorded in April 2022 to 17.71%. This is according to the recently released Consumer Price Index report, released by the National Bureau of Statistics (NBS).
- The food index rose by 19.5% year-on-year in May 2022, representing a 1.13% points uptick compared to 18.37% recorded in the previous month and 2.78% decline compared to the corresponding period of 2021 (22.28%).
- The exchange rate at the parallel market remained stable on Monday growing slightly stronger, having closed at N606/$1, from N607/$1 recorded as of the close of trading activities last week on Friday. This is according to information from BDC operators.
- The World Bank has stated that the CBN’s multiple exchange rates, trade restrictions, and the financing of the public deficit continue to damage the business environment
- The World Bank also stated that the CBN’s low-interest loans undermines commercial banks that lend on a risk-adjusted pricing basis and needs to be dialled down
- Further, Nigeria’s external reserves are expected to decline as the Central Bank of Nigeria (CBN) is expected to clear $1.7 billion worth of FX backlog and FX forward contracts to foreigners by the end-October 2022.