CBN alone can’t manage the economy

The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) adopted measures during its last meeting which were aimed at addressing the strangulating liquidity squeeze in the economy. The Committee reduced the Monetary Policy Rate (MPR) from 13% to 11% and the Cash Reserve Rate (CRR) from 25% to 20%. The apex bank also changed […]

The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) adopted measures during its last meeting which were aimed at addressing the strangulating liquidity squeeze in the economy. The Committee reduced the Monetary Policy Rate (MPR) from 13% to 11% and the Cash Reserve Rate (CRR) from 25% to 20%. The apex bank also changed the symmetric corridor of 200 basis points around the MPR to an asymmetric corridor of +200 and -700 basis points.
According to CBN Governor Godwin Emefiele, the measures were initiated in order to address the weakening fundamentals of the national economy, in particular the low output growth, rising unemployment and the uncertainties of the global economy. In the light of the foregoing, CBN plans to restrict access to the additional liquidity stemming from the measures to areas of the real sector that could generate high employment such as agriculture, infrastructure and solid minerals.
Emefiele further clarified that the measures were informed by concerns over the failure of past liquidity injection schemes which were embarked upon through measures including the lowering of the CRR by the last MPC. As the apex bank admitted, the past measures did not improve credit delivery to promote meaningful growth and empowerment in sensitive sectors of the economy. Rather more credit was given to sectors with low employment elasticity or potential. He then restated the commitment of CBN to evolve and implement measures that would be supportive of consolidating and strengthening output with an eye on price stability.
Seen in perspective, the CBN initiative remains commendable for its promise to open up the economy, especially in the wake of the fall in the international price of crude oil.  As the top foreign exchange earner of the Nigerian economy and also the mainstay of government revenues, significant changes in crude oil’s fortunes adversely affect the state of our import dependent economy. Following the fall in oil prices the economy suffered a corresponding drop in foreign exchange which launched attendant challenges, one of which is a liquidity crunch. The new measures by CBN are therefore well placed to help stem the adverse effects.
Yet it is in doubt how far CBN can go with its present solo-run in fostering the various policy prescriptions and follow-up responses on the nation’s economy. It has remained a matter of concern among stakeholders in the Nigerian economy that since the inception of the present administration on May 29th 2015, it is yet to articulate a concise and workable economic policy that defines in clear terms its plans for the economy. Rather much of what is fed the public are a series of eclectic, knee-jerk responses by individual agencies, the most significant of which is CBN. This approach leaves much to be desired as it hardly offers room for strategic forward planning by stake holders in the Nigerian economy.
Even at its best the capacity of the CBN to stand in as the main driver of the Nigerian economy is circumscribed by statute. Hence it can only do well by synchronizing with other stake-holders. This condition is accentuated by the fact that even with its present measures at expanding liquidity, it needs the collaboration of other agencies in the economy to succeed.
The situation therefore behoves the administration to fast track the evolution of its economic policy that will drive its change agenda over which public expectations have hit fever pitch. Now that it has a full-fledged cabinet of ministers in place, it needs to muster the speed to catch up with the time it lost in setting up the machinery of governance. The central Bank is already overexposed in its hectic efforts to cope with the challenges facing the economy. It is high time that the new Ministers of Finance and National Planning and Budget step forward with concrete economic measures of which CBN’s interventions can be a small but important part. Also, the National Assembly approved fifteen Special Advisers for President Buhari since June. It is high time that he has an Adviser on Economic Affairs.