The Central Bank of Nigeria (CBN) has an assemblage of financial and economic experts that daily brainstorm in order to ensure the monetary policies of the country keeps the economic development under check.
While the CBN management and experts endeavour to get the monetary policies right in line with the prevailing economic realities both globally, the fiscal policies, which largely remain beyond their control remains a thing of concern.
Experts therefore believe the independence of the CBN and the needed respect for the often well thought out monetary policy guidance that comes from the CBN needs to be respected by the fiscal policy authorities to create the synergy of the monetary and fiscal policy management.
Financial reporters and business editors were made to understand these and also to understand the effort of the CBN amidst a plummeting naira value as well as the role the media can play to keep the situation under control.
The event was the seminar for financial reporters and business editor, which held in Calabar with the theme “The Impact of Crude oil price on external reserves and exchange rate management in Nigeria”.
Resource persons include Mr. Akinsowon Dawodu, the CEO/ Managing Director of Citibank Nigeria limited who x-rayed the implication of Closure of the Retail Dutch Auction System (RDAS) and Wholesale Dutch Auction System (WDAS) segment of Foreign Exchange Market in Nigeria.
In his submission, RDAS closure is the first step toward a complete liberalisation of the foreign exchange market and economic transformation must precede total liberalisation.
He a reference base from the case of Brazil where in 1999, following a financial crisis and an unsuccessful defense of the currency which led to the external reserve declining from more than US$70 billion at the beginning of 1998 to half that amount by year end. Brazil was forced to devalue and float its currency.
Brazilian government made rigorous fiscal adjustment programme to ensure long-term stability of fiscal accounts. The government consolidated its fiscal management and established limits for personnel expenditures at Federal, state and municipal levels. Brazil also changed its trade policy and intensified production in its area of strength. Export of goods and services increased to 9.5 per cent of GDP in 1999 from 7 per cent of GDP in 1998; and has stabilised between 11.5 per cent and 12 per cent.
Another resource person, Mr. Bismark Rewane of Financial Derivatives, Lagos in his paper looked at the evolution of the Foreign Exchange Market in Nigeria: the way forward.
According to Rewane, n the last Ten Years the naira has declined from N130/$ to N199/$ – 53 per cent, reflecting oil prices and external reserves. For instance, External reserves in 2008 stood at $60bn and Naira at N116/$. In 2015 External Reserve was $30.62bn and the Naira at N199 per dollar.
As he puts it, fiscal crisis has led to a monetary crisis and Nigeria has a currency crisis. The price and value of the naira are at tangents. Poor timing of currency adjustments have prolonged currency crisis and Subsidies (exchange rate and fuel) are major sources of leakages. Fuel subsidy constitutes 30 per cent of Nigeria’s import bill.
He then recommended that: “Remove subsidies, aberrational demand pressure disappears. Reduce import bill of bogus demand by 15-20 per cent”. According to him, “Using the PPP formula, the true value of the naira should be N186.75. The difference between this rate and N230 is the fear factor”.
In another paper, Mr. Mose Tule spoke on Crude Oil Price Volatility: Implications for External Reserves and Exchange Rate Management in Nigeria.
He recalled that in 2008, crude oil prices fell from over $100 to between $38 and $40 per barrel. To cushion the effect of the fall on the financial system, the risk management system of banks was strengthened. This can be adjudged a positive outcome of the situation given that the financial system emerged stronger from the episode. Hence, there is hope that Nigeria will benefit from the current drop in oil prices as it presents an opportunity for economic diversification away from crude oil as the main revenue earner.
“Continuous decline in oil prices might compel the government to pursue tighter fiscal policy that could slow economic growth, reduce income and infrastructure development. The Central Bank of Nigeria could consider sustaining the demand management policies as a means of cushioning the effect of tighter fiscal policy in case it crystalises”.
The undiversified structure of the economy is one major factor that exposes the country to external shocks, especially, changes in oil prices he quoted Ogunbiyi in one of his submissions and added that One way of addressing the situation is to sustain the revamp of the country’s agriculture sector. Government needs to really appreciate the potential of the sector as a catalyst for economic and industrial transformation. Consequently, government needs to recreate a modernised professional and commercial farming sector, supported by improved infrastructure and research into high performance seeds and livestock.
“Government should make access to loans meant for agriculture easier while large scale farming powered by mechanised infrastructure should be the central goal.
“Aside from revamping agriculture, improving the tourism sector could also be a boost to the country’s economy. Tourism is a veritable instrument for socio-economic development. It impacts directly on the economy through the provision of resources and income that could be deployed to enhance economic growth, accelerate development and reduce poverty.
A colloquium was conducted by Mr. C. N. O. Mordi, a former Director of Research in the CBN to measure the Credibility of Central Bank with the CBN as a case study while Mr. Stanley Egbochukwu, the CEO and Publisher of Manufacturing Today Marketing Information Services Ltd. Lagos took participants in the seminar on the Role of the Media in Communication Developments in Foreign Exchange Management.
For Mordi, the role of the Media since the CBN appears to be proactive? Is it to merely project the various actions of the CBN for public acceptance or help the CBN in different ways to solve its communication problems or play the role of advocacy?
The CBN apparently has been playing its role effectively and needs the media desperately to do their part. It is believed that without the media, messages will not go too far and the level of awareness will be too low.
The media lend credence to actions taken and provide the much-desired feedback, which is a part of the kernel of communication.
The CBN expects Nigeria’s financial journalists and economic writers to keep making important and effective contributions by drawing the attention of the regulatory body to problem areas that need to be tackled. The media should articulate informed opinions of the well-meaning, well-rated members of the public.
The media provide avenues for expressions from the general public. The media also assess the impact of actions taken and advise on the next line of actions. The major role of the media is to create awareness and stimulate reactions.
The media is better known for whistle blowing to warn on dangers inherent in sustaining particular policy options. The whistle-blowing role appears nowadays to be the exclusive preserve of the social media. The legacy media, on the other hand, concentrate on the provision of solutions and the provision of informed analysis.
To wrap up the seminar the authorities of the Central Bank of Nigeria charged Finance correspondents in Media houses and business editors not to be sensational in their approach to reports touching on developments affecting the apex bank.
The Director; Corporate Communications CBN, Mr. Ibrahim Muazu gave the charge noting that the CBN is a sensitive institution where every step, statement or report touching on the bank has a corresponding effect and impact on the economic sector of the country.
“CBN is a sensitive institution and any information attributed to it is taken serious, as such journalists or financial reporters should at all times try to understand issues leading to any directive, development, pronouncement or policy in other to present their report under the right context”, the Corporate Communication Director said.