Nik Ogbulie
The much awaited first official reaction of the CBN Governor, Yemi Cardoso, on the monetary policy and the general state of the Nigerian economy was largely believed to have been predictable.
Apart from the seeming proposal for another round of recapitalisation in the banking sector, and the change in the run of the meetings of the MPC which will now become a quarterly ritual, the entire position of the apex bank was a rehearsal of the popular government positions on why the Federal Government struck on the former leadership of the bank, thereby justifying the reactions of government that truncated the various rates and levels of perception of the apex banks to a wilder domestic and external audiences.
Our investigations reveal that one obvious position of the speech that has revealed it as a make-good presentation for the Federal Government is the claim of poor liquidity in the system while at the same time recommending the reintroduction of Open Market Operation (OMO) as a tool to mitigate excess liquidity in the system in due course.
Our sources are also of the position that the speech did not see any reason for the suspension of forex to some 43 imported items at a time the volume of forex demand on imports was higher than the total revenue, noting that the exchange rate really had a relief from that development which resulted to growth in the alternative products which were sourced domestically.
Fillers also noted that the indication of an obvious shift towards fiscal policy additions to the monetary policy measures was as a result of the collapse in the fiscal policy management by the ministry of finance and planning, whose preoccupation within the period in review was debt and revenue crisis management.
A comprehensive examination of the governor’s speech indicated a sharp slant towards the positions of government for slamming the immediate management of the CBN without providing the data that inform the entire misgivings of that administration. It is further believed that the new CBN Governor should have reviewed where and how the predecessor failed with empirical support on forex management, rates administration, inflationary trend management and the administration of foreign reserve. The speech was largely seen as a part of an effort to give the dog a bad name so as to hang it.
Much as Cardoso’s renewed effort to improve the capacity of banks in support of his One Trillion Dollar economy, there are strong indications that the problems of the Nigerian economy in the last eight years have not been traced to poor capitalization as all available projects target in the country did not suffer funding availability. It was further believed that various funding sources from all over the regions have been available to the Nigerian space but for security problems, poor corporate governance and institutional corruption and state capture.
Observers also believe that the shift to fiscal policy by the CBN within the period in question stabilised domestic prices of goods and reduced the estimated rate in standard of living which has further deteriorated since the last eight months. They also believe that the dual exchange rate was an intervention and an approach which offer better psychological relief to business management than now that the failure in the forex rate has extended higher negative connotations to the Nigerian economy.
Our understanding of the Governor’s position on the banks is a proposal which does not consider the level of success of the last banking sector consolidation and the consequences it brought to bear to the economy. More than 15 years after that consolidation, many victims of it still litter the streets both as a result of job losses, skills failure and assets loss.
Cardoso must review the current strength of the Nigerian Exchange and study if the present capacity of the N39 trillion capitalization can encourage a capital growth when compared with the N13 trillion capitalizatoon of the defunct Nigerian Stock Exchange in 2009. The existence of adequate institutions for such a development is not assured anymore as the current NGX cannot be compared to what we used to have before the last consolidation.
There are strong indications that investment structure in the Nigerian Capital Market favours the money bags and many holders of dirty money and conscriptors of public funds and this will make our banks strongly owned by the core capitalists who may not support the application of core financial intermediation to the root of economic development. This will continue to create a wide ownership gap in the banking sector.
The CBN did not attempt a solution to the revenue crisis in the economy as a prelude to a stable monetary policy support. Nigerians would have loved to know where our next funds that would stabilise the budgets will come from other than borrowings.
Bankers would want to know the future of digital money in this administration considering the new global trends. They would want to be told how the orthodox policies will be applied to the various unorthodox trends in the economy to improve our monetary policy activities considering the level of informality in our system.
But one good thing to take home from the speech is the fact that, in spite of the perceived poor capitalization of banks, the banking industry is rock-solid and has passed all the stability tests.
Going forward, Cardoso should find out from the banks if they are interested in investing in the big ticket projects before asking all to recapitalize. Does he know the skills strength of the banks and the vision of the banks. He must respect the business model of the banks.
Fiscal policy encroachment may not be all rubbish , afterall. He did not tell us what the CBN’s position would be in the case of very uneven salaries in the country in line with what the politicians earn. He must also discuss the budget implementation saga and the various issues concerning scholarships , contracts, bursaries and very large appointments and the accompanying wages . He must be able to tell us the implications of these to his perceived “orthodox monetary policy”.
