Director-General of the West African Institute for Financial and Economic Management, WAIFEM, Professor Akpan Ekpo, weekend, blamed the Federal Government and the Central Bank of Nigeria, CBN, for the country’s current economic woes and its recent plunge into recession.
WAIFEM was established July 22, 1996, by the governors of the Central Banks of The Gambia, Ghana, Liberia, Nigeria and Sierra Leone.
In an email response to enquiries in Abuja, Ekpo, an economists, former CBN director as well as ex-Vice Chancellor of the University of Uyo, noted that the delay in passing and implementing the 2016 budget and the CBN’s monetary and foreign exchange policy stance helped worsened the country’s economic situation.
Laments near absence of fiscal policy
He said: “There was a near absence of fiscal policy – the economy lacks the necessary fiscal buffers. Money and exchange rate policies were the only voice. Rather than implementing quantitative easing, the CBN was interested in tightening monetary policy. When an economy is almost in a recession, monetary expansion would help towards recovery.”
He further argued that the CBN’s foreign exchange framework was another policy in the wrong direction, stating that rather than implementing a robust managed exchange rate regime, the CBN allowed the naira, which is not convertible, to float freely looking for a non-existent stability and equilibrium in both the short and long-terms.
“When a commodity is in short supply, market forces cannot determine the ‘correct’ value. The only source of foreign exchange for the economy is crude oil export, hence unrealistic assumptions under a competitive market cannot work in the foreign exchange market,” he added.
Faults CBN’s forex futures market, other policies
Ekpo faulted the CBN’s decision to introduce a futures market within a foreign exchange market, stating that it further complicated Nigeria’s economic woes, especially in view of the fact that the Nigerian economy is heavily dependent on imports of goods and services and has only one major single source of earning foreign exchange.
He said: “The delay in adjusting the band of the value of the naira to the dollar, when the market provided a guide through scarcity, heightened the crisis. If recession persists, monetary, fiscal policies would be ineffective.”
He, however, warned that if the recession persists, monetary and exchange rate policy would be ineffective, adding that except drastic measures to reflate the economy were put in place, the third quarter of 2016 would not be different.
Lists conditions for economic revival
For the country to be able to get out of recession, Ekpo said the Federal Government should place emphasis on spending on capital projects and recurrent expenditures, especially in the area of payment of salaries owed workers, while also increasing its spending on power, roads and other infrastructure.
He disclosed that the Federal Government must assist states to pay workers owed salaries to stimulate aggregate demand, adding that the time to design policies to diversify the economy was now.
“I hate to disappoint Nigerians, the private sector cannot get us out of the recession. Government must lead for the private sector to follow until recovery sets in. As part of stimulating aggregate demand, the social programmes in the budget must be implemented urgently.
“Furthermore, government has no choice but to borrow externally and domestically to spend and get the economy out of the recession.
“Our economy consumes what it does not produce, hence there is need for a re-orientation for citizens to prefer locally produced goods and services. Heavy tariffs must be placed on imported goods and services. Lending rates are just too high to revamp the real sector.”
“Government must be strategic and think outside the box by grafting policies and programmes which would enable potential investors produce and supply both domestic and external markets.
“There has been too much emphasis on producing to earn forex; we only need a productive economy and other things would adjust.
‘’However, it must be noted that recessions are regular occurrences in a capitalist economy, hence the need for proper economic management in order to minimize its adverse effects.
“There is no doubt that this recession would pass away but another one would come, for no two recessions are alike. Therefore, managing an economy is not a tea party,” he added.