Expert Calls for Increased Monetary, Fiscal Policies Convergence

A Strategist & International Consultant, who is also the CEO, Espera Global Corporation, Dr. Glenn S. Prince-Abbi, has stressed the need for improved monetary policy and fiscal policy convergence and coordination, saying that policy actors must act with more decisiveness with an eye on the ball to quickly put the economy in growth mode. He pointed out that at a time when economic slowdown continues to affect the condition of living in the country, the federal government as well as the Central Bank of Nigeria (CBN) must pursue policies that would ameliorate the pains of Nigerians. Prince-Abbi who said this in a speech made available to THISDAY, insisted that policy makers must act with all sense of urgency, “to calibrate the fundamentals the best we can.” According to him, the action of the Monetary Policy Committee on Tuesday to retain all the key monetary policy indicators was worrisome. He said he was particularly concerned that the high interest rate regime (deriving from MPR at 14 per cent) was retained without a concretely convincing premise. Prince-Abbi noted that achieving stable macroeconomic fundamentals was inexorably integral to Nigeria’s economic growth which currently is in limbo and both monetary policy and fiscal policy actions must coalesce to lift the economy. “I am however worried to observe that this coalescence is at least in one way impeded by the decision to retain in particular the high interest rate regime which in any situation tends to stifle production and by extension economic growth. “Yes, monetary policy instruments alone cannot engender or trigger economic growth but they can contribute to stifling growth and worsening unemployment if they are wrongly structured as they deny producers of goods and services, i.e. the key economic players, the latitude they need when they are already hedged in by a chain of other factors such as, as well noted by the MPC, high cost of power and energy, transport, production factors, as well as rising prices of imports all of which are visited on consumer prices. “It goes without saying that the high interest rate regime which is retained has not allowed any form of reduction in the costs that producers are already contending with. A reduction of the interest rate would improve their cost structure as it makes the cost of capital cheaper. They use capital for everything from equipment procurements, to operational costs and working capital expenses. The likely impact of this is that headline inflation which is already at a ceiling breaking 18.33% will remain so if not worsen. I strongly disagree with the CBN on this score,” he added. However, stated that that government actions at both national and subnational levels in fulfilling payment obligations on salaries, contracts, and release of money for infrastructure will surely help in this regard. Source: Thisday