Between Godwin Emefiele and Kemi Adeosun

On Tuesday, the Godwin Emefiele-led Central Bank of Nigeria dismissed the call for a cut in the Monetary Policy Rate (benchmark lending rate) by the Minister of Finance, Kemi Adeosun, citing the risk of higher inflation and failure of past cuts to achieve increased real sector productivity as focal reasons.
While listening to Emefiele’s address at the end of the two-day Monetary Policy Committee meeting, it dawned on me that the committee members, led by Emefiele had unwittingly decided to work directly against the interest of an already battered Nigerian economy. This means, by logical extension, that they have also ignorantly perfected plans of pushing over 80 per cent of the Nigerian masses, who are innocently suffering the consequences of an avoidable recession, into deeper economic trouble.
At the last count, in just seven, out of the 36 states of the federation, 62 cases of suicide have been confirmed by the various police commands. More cases, linked to the prevailing worst economic recession in 29 years, are being recorded across other regions on a daily basis, because the poor man simply has no hope! Even those who have what Nigerians would term ‘connections’ cannot tap them at all because the rich men are also crying behind closed doors. Where do you turn to for your children’s school fees, when the big man in your family who, hitherto, could bridge the gap before a respite, cannot conveniently sustain his children in their ace schools? How do you begin to tell your wealthier close associate to help pump in some money to save your dying business, when the facilities on his production sites have gathered scales of dust? God help you as an entrepreneur, if you run into cash flow problems. The banks that should ordinarily come to the rescue in situations like that are themselves struggling under the weight of huge non-performing loans, which had risen by 78 per cent, year-on-year, to N649.63 billion as at May this year.
In a scenario as bad as the foregoing, and with the National Bureau of Statistics revealing a 2.06 per cent contraction of the nation’s Gross Domestic Product to its lowest point in three decades, the explanation of Emefiele and his MPC team, just like what was offered for the last MPR hike, is nothing but absolute rubbish.
The finance minister probably got her call for rates cut right, but I would want to differ on her central reason – to allow the Federal Government borrow domestically to boost the economy without increasing debt servicing costs. This reason is no doubt valid, but the need to stimulate economic activities by breathing life into the dying productive sector is paramount. It is almost clear that government borrowing at this critical period will be channeled more towards payment of salaries and the execution of phony capital projects that will replenish the pockets of cash-strapped politicians. For the umpteenth time, Emefiele has reiterated the need for the apex bank to defend its mandate of price stability. But in a situation where unemployment is about piercing the roof, and persistent high inflation amid stagnant demand has pushed the economy into stagflation, the first option for Emefiele or any rational policy maker should not be to save price at the expense of troubled lives. A simpleton in Nigeria today should know that prices are up because of rising production costs and the absence of alternatives to imported inputs or goods and services in many sectors. One would therefore expect the right synergy that would pave the way for quality local options to displace more expensive imports in the face of a very weak naira.
The economy is so troubled at the moment that inflation targetting becomes secondary. Fighting to protect discordant policy positions on the pages of newspapers is a big insult honourable Nigerians would not want to take from two key institutions at the centre of economic revival efforts. In the case of Emefiele, some of the reasons he proffered for his MP posture are at best laughable.
He said, for instance, that “when you stimulate demand for goods by providing money without taking action to boost industrial capacity, what happens is that you will see a situation where you have too much money chasing too few goods, which will also worsen the inflationary condition that we are in now.” He said this to support the CBN’s argument that banks had not, in previous rate cut situations, channeled available funds to productive sectors, which, in the MPC’s view, meant that a reduction in the anchor interest rate would not stimulate production.
It would have been expected that since there were statistics to prove the direction of the banks’ funds, an institution that is serious about regenerating an economy in an unusual crisis would take unusual steps to mandate the banks, with available supervisory weapons, to channel a greater percentage of their funds to the productive sector. Checks and balances could then be put in place to also save the banks from burning their fingers in the process.
Some have said that there may be no use writing too much grammar on ways out of this recession because it seems the Federal Government, or better put, those in the eye of the storm only listen to their heartbeats. This is one of the reasons many scholars, politicians, including those in government, who appreciate the consequences of leaving everything as it is, are calling for a change of hands at the centre.
Deputy Senate President Ike Ekweremadu on Tuesday advised President Muhammadu Buhari to reshuffle his cabinet and put square pegs in square holes. He advised the President to redeploy Budget and National Planning Minister, Sen. Udoma Udo Udoma; and his finance minister. (He might have forgotten to mention Emefiele).
Aside from Ekweremadu, every rational Nigerian is looking up to the President to use the looming cabinet reshuffle to right the overwhelming wrongs in the administration’s policy space. We’ve had enough of ill-advised trial and error economics.