By Onyinye Nwachukwu, Abuja
…As local market boot government borrowing request
The Central Bank of Nigeria (CBN) has again warned that the country’s import bill presently at $976 billion is not sustainable especially with depleting reserves and low foreign exchange earnings.
Moses Tule, CBN Director of Monetary Policy raised the concerns on Tuesday. He said that the increasing preference of Nigerians for imported goods and an absence of export culture was helping push the economy deeper into economic crisis.
Speaking at the 12th business managers redoubtable of the Chartered Institute Bankers of Nigeria (CIBN) in Abuja, Tule said citizens’s consumption pattern can no longer be supported by the country’s earnings.
“We refused to realise that the economy is in dire shock and things are no longer normal,” he said, speaking at the event, titled, “The realities of the Nigerian economy: Recession and the way forward.”
“The moment we began to prefer imported goods to our domestically produced goods, we laid the foundation and built the superstructure to where we are now. This is a conscious choice. Every country makes the choice where it wants to be. This is what we chose for ourselves as a country.
“When you don’t export…and the imposition of an external goods and services culture has put pressure on the currency, there is nothing the CBN can do about this. We have got to produce, consume what we produce and export what we produce. That is the way out.”
Explaining how the nation got into recession, Tule said, “Oil prices are down. Not only are oil prices down, the Niger Delta Avengers have blown up oil producing facilities and export facilities, severally.
” So we have oil prices and production going down. The implication is that foreign exchange earnings are going down, but unfortunately, our import expenditure is not going down. It is still in the region of N976 billion, monthly.”
He however admitted that so many other countries are also going through some economic shocks but that Nigeria’s case is worsened by its huge population and high population growth rate of about 3.5 percent which he said would mean that Nigeria must grow economy at 5.5 percent to stay afloat. He said with the curent recession, the growth deficit is as high as 7.56 percent which would be needed to just sustain the economy.
Emphasisng the need for government to quickly reflate the economy, he said Japan for example which has also been through recession has been injecting about 3.7 trillion yen monthly into its economy and having not seen commendable results, recently pumped whopping 352 trillion yen.
Explains Nigeria’s economic dire situation, Tule explained that due to the present recession, people’s purchasing power has dropped which has also impacted on consumption and output, profit margin, investments and ofcourse jobs.
He said Non-Performing Loans have equally risen from 3 percent to as high as 15 percent while government overall deficit has jumped from three to five percent.
He said unfortunately, “policy prescription has also not been right. We have not sat down to analyse the recession issue. People only pontificate about what should be done.”
Tule said the problem is even heightened by the fact that government can no longer borrow as the local market for lack of confidence.
“Last week they (government ) came back with only 25 per cent of what they wanted to borrow from the market- domestic market- saying we haven’t seen your fiscal policy, we haven’t seen the direction. We will not lend. We will not buy your instrument. ‘That is market speaking. said no. If you are offering to us at 20 per cent, we will not accept.”’
“What they are saying is ‘we have weighed the risks, they are higher and they said give it to us at 22 per cent or higher, if not we will not take.’ So for every N100 , the government takes N78 to themselves and gives the public N22.”
Moreover, he said the on-going economic recession has persisted owing to application of wrong tools, advice and inadequate synergy between monetary and fiscal policies,
According to him, the Monetary Policy Committee ( MPC ) had, since early last year, consistently warned that the nation would slip into recession if urgent steps were not taken but were not heeded.
He said the only way out of the economic crisis is for the fiscal authorities to take the lead “There is no other way out because fiscal policy provides the leadership for macro-economic management in every country . Monetary policy only comes as a complementary policy.
“In all climes, fiscal policy provides the leadership and when monetary policy has reached its end, and it can no longer stimulate output growth, fiscal policy must come with huge injections. This much is not a new recommendation. The fiscal authorities are aware of this. As you aware, government is looking for some external funding to do exactly this,” he added.