“Very good macroeconomic indicators fundamental for economic growth and wealth creation do not put food on the table.”
The Central Bank of Nigeria, CBN must provide policy incentives that would guarantee greater credit to select sectors to spur economic growth and create more jobs, a civil society group, Centre for Social Justice, CSJ, has said.
The group in a review of key resolutions of the Monetary Policy Committee, MPC, during its meeting in July, also wants the CBN to collaborate with the fiscal policy authorities to ensure a coordinated approach to national development by guaranteeing greater investments in selected critical infrastructure, especially in the power, agriculture and manufacturing sectors.
The MPC in its communique at the end of the meeting resolved for the 12th time consecutively to leave monetary policy rate, MPR, also known as lending rate, at 12 per cent, with a corridor of +/- 200 basis points around the midpoint; Liquidity Ratio at 30 per cent, public sector Cash Reserve Requirement, CRR, at 75 per cent, and private sector CRR at 15 per cent.
Noting the Committee’s holistic view of monetary and fiscal policies as drivers of employment, wealth creation and business growth, the group said the MPC should have gone further to articulate the importance of the mechanism for ensuring that macroeconomic stability.
“Very good macroeconomic indicators fundamental for economic growth and wealth creation do not put food on the table,” the CSJ said. “They are the means of ensuring improvements in livelihoods.”
The CBN, the group said, must get back to the pledge earlier by its governor, Godwin Emefiele, to reduce the lending rate and make credit more available to medium and small scale enterprises.
Urging the CBN to empirically examine the cause of the persistent excess liquidity, which appears to have defied all solutions devised to contain it, the CSJ said rather than its current approach of attacking the symptoms by offering mere palliatives, the bank should tackle the challenge head-on.
“The MPC should start considering steps which would be implemented immediately after the elections to ensure that sound macroeconomic fundamentals are transmitted to improvements in the economy- production, jobs and improved livelihoods,” the group said.
On the potentials of the power sector to facilitate job creation, the CSJ frowned at the situation where resolutions of the problems in the sector have been allowed to linger for over seven years.
Though it acknowledged the difficulty in mobilizing the huge funding required for the construction of the gas pipelines to supply gas to the power plants, the CSJ lamented that it was taking so long.
If the resources needed to fix the gas supply challenge to the power plants were unavailable, the group asked the Federal Government to borrow specifically to finance the scheme, while the debt could be secured through a business plan that has detailed cost benefit analysis.
On the alternative, the group recommended public private partnerships to fund the gas projects, with opportunities given not only to institutional investors, but also all Nigerians to be part of solving the gas challenge.
“If Nigerians oversubscribed bank public offerings some years ago and some of them had to return subscriptions to subscribers, Nigerians will definitely oversubscribe any public offers for investments in the gas sector. If the funds are available, there is no reason that will hold back verifiable, progressive, incremental solutions in 12-18 months,” the CSJ said.
On the likelihood of increased aggregate spending in the run up to the 2015 elections, the CSJ noted that the associated risks, which have been resurfacing in the last one year, have increased the prospects about possible damage to the economy as the elections draw closer.
The group said the development has underscored the urgent need for effective regulation of political and campaign finance in line with the provisions of the Electoral Act 2010 as amended.
Emphasizing the need for further tightening of the regulations by the Independent National Electoral Commission, INEC, to ensure that campaign finance limits were respected, the CSJ said any candidate or party found violating the rules should be sanctioned in accordance with the law.
Demanding that the law should be no respecter of persons, the CSJ asked INEC to call the ruling Peoples Democratic Party, PDP and its potential candidate to order for allegedly commencing campaigns before the formal declaration of the notice of poll.
Identifying the possible consequences of failure to regulate spending during elections, the CSJ said the threat would result in capital expenditure that cannot be accounted for in real life.
Besides, the value for money for procurements and essentials would diminish, while expenditures that give no benefit to the economy or not in accordance with stated rules would increase.
Noting that the run-up to the 2015 elections would see increased corruption and stealing of public funds as well as increased expenditures for frivolities that add no value, the CSJ called on the anti-corruption agencies, as well as the legislators and the media, `to wake to their responsibilities by intensifying citizens’ oversight over the allocation and management of public resources.
On the gross official external reserve, which grew from $37.31 billion at end-June 2014 to $40.20 billion by July 18, the group said that with crude oil currently selling above $100 per barrel, compared with the official benchmark price of $77.5 per barrel in this year’s Appropriation Act, the country’s external reserves should, by now, be in excess of $80billion, if the country’s resources were properly managed.
Reiterating the call for the National Assembly to expedite action on the passage of the Petroleum Industry Bill, PIB, the CSJ stated that more reserves would accrue if the industry met and exceeded the 2014 production target of 2.388million barrels of crude oil per day through a deliberate effort to ramp up oil production, while checking the growing incidence of crude oil theft.
Besides, it noted that the country’s reserves would further be boosted if the implementation of the Federal Government’s agriculture agenda intensified.
It called for more support to be channeled to agriculture, while the current policy in favour of local production should not only be sustained, but also extended to other sectors of the economy, including petroleum refining and manufacturing, to guarantee local investments that would reduce importation while increasing the value of local production.
On the impact of the insurgency on food production, the CSJ noted the interplay between the economy, politics and insurgency, particularly the underlying pressure on food harvest from the North East and Central States currently facing attacks by Boko Haram.
It called on the Federal Government to do all within its powers to end the insurgency through a multiplicity of strategic actions, including dialogue, stepping up the armed reaction against the insurgents, and collaboration with the international community to resolve the crisis.