(Being a Review of Communique No.103 of the Monetary Policy Committee of the Central Bank of Nigeria by Centre for Social Justice)
The Central Bank of Nigeria (CBN) Communique No.103 of the Monetary Policy Committee (MPC) following their meetings of September 21 and 22, 2015 reaffirmed, as it relates to the Nigerian economy, what was already in the public domain. The key issues are that:
• Real GDP grew by 2.35 per cent in Quarter 2 of 2015 compared with 3.96 per cent and 6.54 percent in Quarter 1 2015 and the corresponding period of 2014. The National Bureau of Statistics (NBS) projects real GDP to grow by a paltry 2.63 percent in 2015 against the growth figure of 6.22 per cent recorded in 2014.

• Year on year headline inflation edged upwards to 9.3 per cent in August from 9.2 per cent in June and July 2015. Rising inflationary trend was a concern to the MPC considering the already tight monetary policy environment.

• Net Domestic Credit rose by 11 per cent which annualises to 16.49 per cent in the same period. The growth rate in NDC was mainly attributable to Federal Government borrowing which reached 140.13 per cent in August 2015.

• The bearish trend in the equities segment of the Capital Market continued as the All Share Index decreased by 9.3 per cent from 33,456.83 on June 1 2015 to 30,332.68 on September 18, 2015. Also market capitalization fell by 8.8 per cent from N11.42 trillion to N10.42 trillion during the period under review. Relative to end December 2014, the market depreciated by 12.5 (All Share Index) and 9.3 (market capitalisation) percent respectively.

• The decline in official reserves from US$31.20billion at end July to US$30.63billion on September 17, 2015 and the marginal depreciation of the Naira to the USD by N0.5k at the inter bank exchange between end June and September 17, 2015. There has been continued demand pressure on the foreign exchange market as oil prices decline.

• Slowed growth for the two Quarters (1st and 2nd of 2015) attributable to decreased public and private investments especially, the non-payment of public sector workers at state and local government levels which has dampened consumer demand.
• Possible stress in the performance indicators of the banking sector on the back of the implementation of the TSA, elongation of the tenure of state government loans as well as loans to the oil and gas sector. All these could aggravate liquidity conditions in banks thereby impairing their financial intermediation role.

• The economy could slip into a recession in 2006 if proactive steps were not taken to revive growth in key sectors of the economy. The absence of synergy between monetary and fiscal policy remained one of the most potent obstacles to sustainable growth.

In the light of the foregoing, CSJ urges the President of the Federal Republic of Nigeria and other relevant authorities to take immediate and urgent steps and not to wait until the economy finally slips into recession before acting. The recommended steps are in the following areas.
• To immediately appoint Federal Ministers especially, the Minister responsible for Finance and Economic Management and to constitute the Economic Management Team of the Federal Government.

• To unveil the economic agenda of the administration whilst giving Nigerians the opportunity to make inputs for its modification and fine-tuning. Public and private stakeholders cannot continue groping in the dark and imagining the content of government’s economic agenda. The unveiling of a holistic framework has become a matter of urgent national importance.

• To address the Nation on October 1, 2015 on the state of nation especially focusing on the economy; the administration’s achievement so far and what is to be done in the short and medium term to revive the economy. Thereafter, the President should start the quarterly media briefings on his administration.

• To create synergy between fiscal and monetary policy, unveil the Medium Term Expenditure Framework and Fiscal Strategy Paper 2016-2019 as required by the Fiscal Responsibility Act and open up public dialogue on macroeconomic policies for the medium term. The MTEF should have been ready by the end of June 2015; but it is better late than never.

• To take steps to cut down the cost of governance including the allowances and overhead costs of running the bureaucracy across all arms of government. This will free up resources for national development. CSJ and other CSOs have recently concluded Policy Briefs on the practical ways of cutting down these costs.

• To take steps to release resources for investment in capital projects considering that no funds have been released for the implementation of the entire 2015 federal capital budget. This will facilitate and attract private sector investments and help kick-start economic revival.

• To critically review the continued subsidy for imported petroleum products. As an alternative, design a subsidy regime that will encourage local refining and value addition in the petroleum sector. The Government is invited to consider the complete removal of petroleum subsidy as from the 2016 federal budget.

• CBN should take steps to further reduce the Cash Reserve Ratio to not more than 10 per cent whilst closely monitoring the sources of demand pressure on the foreign exchange market to ensure that funds are not diverted to demands for foreign exchange but applied to “specific growth enhancing and asset creation lending by banks”.
We urge the State Governments to embark on a professional review of their financial management including expenditures with a view to cutting down costs. State Governments should not wait for the accumulation of another arrears of salaries in the next couple of months as this will surely happen if they continue spending at pre-oil decline levels. Maintaining bloated, frivolous, wasteful and unnecessary expenditure heads at a time their revenues have declined due to low oil prices will surely build up another backlog of salaries. Further, continued borrowing from deposit money banks and the capital market is not the way forward for states that could not pay back their due loans and needed the intervention of the CBN and Debt Management Office to reschedule their debts.
Finally, we urge the organised private sector, labour and civil society to begin a robust and intensive proactive engagement of the Federal Government to ensure that the present inertia and policy void is converted into actionable energy for development.
Before it is too late, the time to act is now.

Eze Onyekpere
Lead Director

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