By Habibat Aliu
Afrinvest Research has stressed the need for the Central Bank of Nigeria ( CBN) to address capital control policies and the multiplicity of the Foreign exchange (forex) window in Nigeria which has continued to hinder the inflow of forex into the economy.
The investment firm in its 2023 consumer outlook survey stated that these policies have impacted negatively on Foreign Portfolio Investment( FPI) and Foreign Direct Investment ( FDI), which are currently at the lowest level in more than half a decade.
According to the firm, the RT-200 FX programme, Naira-4-dollar, and other policies created to improve remittances are relatively unattractive to lure exporters and diasporans to the official window given the large spread between the official and parallel market rates.
“We recommend that the CBN rethink its strategy around the anchoring of inflation expectations – the reasons for another interest rate hike.
” If the overall theme is to tame monetary-induced inflation, then financing conditions should reflect the same (however treasury bills rate have remained well below both the MPR and inflation rate). “Additionally, the bank’s policies including the cashless program should be executed to complement price-stability objective while fiscal interventions and FG overdraft financing should be reviewed in light of current realities.”
Furthermore, Afrinvest noted that because the cost of obtaining cash, as well as electronic fees, have fed into the price of food and services in the economy with disruption to manufacturing and some other real sector activities worsening supply-side woes, the high inflation rate debacle would continue to linger so long as the CBN continues to prioritise fiscal expansion goals, especially through overbearing deficit financing and large-scale intervention facilities.
Therefore, the firm suggested that the CBN’s recommendation for the reduction in the national debt level should also include a reconsideration of Apex bank’s recent approach to banking the FG contrary to its establishment act.
” Precisely, overdraft to federal government is a major factor that is expected to take national debt level to unprecedented and unsustainable highs.
“As of Q3:2022, total debt stood at ₦44.1 trillion with the securitisation of ways and means projected to edge debt stock to ₦67.8 trillion. By implication, we project that the debt-to-GDP ratio could surpass the Deby Management Office threshold of 40.0 per cent before year-end.
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