Soludo reiterates need to expedite action on monetary, fiscal policies

47 views0

Soludo reiterates need to expedite action on monetary, fiscal policies

By

Former Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo, yesterday, reiterated his position warning that the two major development instruments, namely monetary and fiscal policies are not yet desirable. Speaking in Lagos, the former CBN boss praised the current initiatives of the apex bank as a right step taken, citing the foreign exchange market specifically, but said they are not only short of the target, but indications of panicky measures. In Soludo’s view, the current crisis in the sector is a fallout of delays in policy and government inaction, giving way for serious economic challenges, and he however said the solution is still reachable. Soludo’s position was made on Wednesday at the eighth yearly Pan African 1:1 Investor Conference sponsored by Renaissance Capital in Lagos. He said the hope for the country is the new economic blueprint, if it is implemented. Although Global Chief Economist, Renaissance Capital, Charles Robertson, cited the World Justice Project, which held that Nigeria recorded a substantial progress in its justice system ahead of any other frontier market, and said further that it is a promising sign of the fight against corruption and ease of doing business in a year. He was not however sure if foreign capital will be available for government to “turbo-charge” its recovery plans. “The currency restrictions imposed on investors will likely mean that investors demand a premium to invest in Nigeria again. Zambia or Ghana or Egypt by contrast, which allowed currency flexibility, should find it easier to attract investors. “Our model suggests the currency is fair value at around NGN375/$. Adjusting for oil, perhaps NGN400/$ is more appropriate,” he said.According to him, the risk, which investors are particularly concerned, is that if oil price goes low, even if CBN is able to hold on to its dollar interventions as the major supplier, speculations will resume because its reserves will be depleted. On infrastructure, he said looking back from 2012, the level of production of electricity in Nigeria, which is key to boost growth has not made any substantial improvement, and he called it one of his “greatest disappointment”. Soludo also mentioned that CBN’s credibility, as independent institution, must be rebuilt, while coordination of fiscal and monetary policies is ensured, saying that the current policies will only stiffen growth. He also countered the restrictions on some items, saying such decisions are more political than practical economics, which can only make life unbearable for millions of Nigerians. “We need import substitution, but not through a crude form. You cannot unify foreign exchange market with discrimination, but through commercial policy and tariff, because such strategy has repeatedly failed in this country and add more trouble. It is 100 steps backward and 15 forward. “This also has something to do with a broken fiscal regime of the country, that is, a system where you have total recurrent expenditure more than revenue, meaning that we are borrowing to finance consumption. “Worrisome is that the borrowing and revenue, which is dollar denominated, are converted at official rate, while the general price level is already adjusted to the parallel market rate, together with some items imported at official rate. “Now we are having debt service to current revenue at 66 per cent. This is ridiculous and we are heading to nowhere. We need to fix the broken pipe, that is, the revenue has to go up and foreign exchange is part of the whole equation. Of course tax collection and blockage of leakages are important,” Soludo said.

Discover more from NewsBreakers

Subscribe to get the latest posts sent to your email.

What's your reaction?

Excited
0
Happy
0
In Love
0
Not Sure
0
Silly
0
Previous
Next

Comments are closed.