An economist, Dr Anthony Aziegbemi, described the Central Bank of Nigeria’s (CBN) latest strategy of strengthening the value of Naira by injecting excess foreign currencies into the market, as an artificial solution.
Aziegbemi said this on Wednesday in Abuja at a round-table on the “Way out of Recession”, organised by Value Fronteira Limited.
The CBN, in the last two weeks, injected over 1.14 billion dollars through the inter-bank market, to meet legitimate demand of foreign currencies for travels, school fees and medicals.
Through this, the CBN hopes to strengthen the value of Naira and simultaneously crash the demand at the black market segment.
“Right now CBN is pumping so much Forex because it has the money. But once the money dries up, we are back to square one.
“Economics is a social science, thus contains laws that govern how economies should be run.
“If you don’t follow these laws and you do it artificially, like banning of the 41 items from getting foreign exchange, the economy won’t work as expected.
“You need to attack the foundation of the economy. You need to get the manufacturing industry up and moving. That is the only way we will have sustainable progress,” he said.
Aziegbemi said that the right way to strengthen the Naira was to invest in critical infrastructure and ensure that the manufacturing and agriculture sector got the necessary support to grow.
In proffering solution out of recession, Aziegbemi called for the downward review of the current monetary policy rate. He recalled that with obvious signs of recession and rising inflation, instead of lowering the monetary rate, the CBN instead, raised it from 11 per cent to 12 per cent and later to 14 per cent.
He said that countries that successfully came out of recession had lowered their monetary policy rates during such trying times to encourage spending.
He cited the case of China, Ethiopia, India, Malaysia, Poland, Mexico and Turkey that reduced lending rate, increased spending and used fiscal policy to stimulate demand in the face of collapsing global demand.
“The Monetary Policy Committee needs to cut down the monetary policy rate to at least 8 per cent.
” The cause of inflation is our over dependence on foreign products and not excess liquidity. So raising the lending rate has made less money available in the system and more difficult to drag the economy out of recession.
“What we need to do is to reduce the lending rate rather than tightening people’s hands,” he said
Aziegbemi advised the government to continue to pay special attention to agriculture and agric-businesses, work on enhancing the sources of Forex and ensure better fiscal and monetary policy coordination.
He canvassed for amnesty for treasury looters, to allow voluntary return of looted funds and encourage government to commence immediate implementation of projects and programmes that would stimulate the economy.
