Petrol Subsidy Removal, Floating Exchange Rate To Have Positive Impact On Economy - CBN

 

Harboursandport.com: Lagos - The Central Bank of Nigeria (CBN) said that removal of petrol subsidy and the adoption of a floating exchange rate, among other government policies, are anticipated to have positive effects on the economy in the medium-term.

The Bank also noted that these measures are expected to enhance investor confidence, attract capital inflows, stimulate domestic investment, and ultimately improve the level of external reserves. Additionally, they are expected to contribute to the stabilisation of the domestic currency.

Governor of the CBN, Mr. Olayemi Cardoso disclosed this at the Chartered Institute of Bankers of Nigeria (CIBN) 58th Annual Bankers’ Dinner and Grand Finale of the Institute’s 60th Anniversary in Lagos.

L - R: Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Tokunbo Abiru; Wife of CIBN President, Ngozi Opara; President/Chairman of Council of the Chartered Institute of Bankers of Nigeria (CIBN), Dr. Ken Opara; Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso; National Treasurer, CIBN, Mrs. Mojisola Bakare-Asieru; Minister of Finance and Coordinating Minister for the Economy, Wale Edun; and 1st Vice President, CIBN, Prof. Pius Deji Olanrewaju at the 58th Annual Bankers Dinner and 60th Anniversary of CIBN in Lagos.

According to Cardoso, the economic agenda of President Bola Ahmed Tinubu's administration, as outlined in the widely circulated Policy Advisory Council report on the national economy earlier this year, has set an ambitious goal of achieving a Gross Domestic Product (GDP) of $1.0 trillion over the next seven years, with clearly defined priority areas and strategies.

He said that attaining this substantial target necessitates sustainable and inclusive economic growth at a significantly higher pace than current levels. The administration has already commenced this journey through fiscal reforms, including the removal of petrol subsidy and the unification of the foreign exchange market rate, he stated.

Cardoso said: “While macroeconomic indicators are valuable in assessing performance, I am equally concerned about the well-being of the average citizen. The plight of the hardworking masses in our urban centers and villages is a pressing concern. We must ask ourselves if there is a potential future where a brilliant and motivated teenager from anywhere in Nigeria could attend a future anniversary dinner instead of being drawn into outlawed militant groups or extremist ideologies. Likewise, recognizing the pivotal role that women play as critical players in the economy, one cannot overlook the significant impact that providing them with opportunities can have on Nigeria’s economic advancement. To address this, we need to develop stronger frameworks for measuring the human condition and ensure that policymakers and business leaders pay as much attention to these measures as they do to macroeconomic indicators. This means tracking indicators such as access to food, shelter, and healthcare, as well as education and skills training opportunities.

“We must also monitor daily wage rates in lower-income jobs, access to basic amenities like electricity, clean water, and sanitation facilities, and availability of public transportation. From a financial inclusion standpoint, we should track access to financial services, including consumer credit, and ultimately, the ability to finance home ownership on a large scale. By having accurate data on the human condition and implementing appropriate policies based on this data, we can expect inclusive economic growth that leads to tangible improvements in the lives of our citizens. It is crucial to give the same visibility to human condition data as we do to macroeconomic data to ensure that the expected economic progress benefits the masses and helps lift them out of their current dire conditions.

“I recently met with a group of small business owners who expressed their concerns about the impact of inflation on their operations. They shared stories of struggling to maintain affordable prices for their customers while facing rising costs for raw materials and supplies. The instability caused by inflation not only affects their profit margins but also hampers their ability to plan for the future. These entrepreneurs stressed the need for price stability to create a conducive business environment that allows them to thrive and contribute to the economy.

“In recent discussions with individuals from different walks of life, I encountered a young family trying to make ends meet in the face of rising prices. They shared their worries about the erosion of their purchasing power and the challenges of meeting basic needs within a tight budget. They emphasized the importance of stable prices to protect the well-being of ordinary citizens and ensure a fair distribution of resources. It is crucial that we prioritize price stability to safeguard the livelihoods of our fellow Nigerians.

“Stabilizing the exchange rate is another critical aspect of our efforts to promote economic stability. I had the privilege of speaking with business owners engaged in international trade. They recounted the difficulties of navigating the fluctuations in the exchange rate, which often led to uncertainties and unexpected costs. The volatility in the foreign exchange market disrupted their planning and hindered their ability to make informed business decisions. It is imperative that we provide transparency and create a market environment that allows fair determination of exchange rates, ensuring stability for businesses and individuals alike.

“To address these challenges, the Central Bank of Nigeria is committed to achieving monetary and price stability. This is not just a technical objective, but it has real-life implications for the wellbeing of our citizens. Through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities, we can ensure a more stable exchange rate, control inflation, and create an enabling environment for businesses and individuals to thrive.

“This is what I, together with my team at the Central Bank have been focused on doing in the past two months. We have critically reviewed the effectiveness of the Central Bank’s monetary policy tools and have spent time fixing the transmission mechanism to ensure the decisions of MPC meetings actually result in desired objectives. For quite some time, there has been a dislocation of our monetary transmission mechanisms rendering the MPC meetings largely ineffective.”