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Experts seek harmonisation of monetary, fiscal policies to tackle recession

By NAN   |   17 October 2016   |   12:08 pm
Nigeria economy. PHOTO:

Nigeria economy. PHOTO:

Some financial experts on Monday called for harmonisation of monetary and fiscal policies to effectively tackle the current recession in the country.

The News Agency of Nigeria (NAN) reports that the Central Bank of Nigeria (CBN) manages monetary policies, while the Federal Ministry of Finance manages fiscal policies.

The experts told the NAN in Lagos that the current monetary policy of inflation targeting was not working and that the inflation rate might be rising rather than dropping.

The September inflation rate was 17.85 per cent up from the 17.61 per cent in August.

Dr Uche Uwaleke, Head of Banking and Finance Department, Nasarawa State University, Keffi, said that monetary policy was not working chiefly because the economy was facing bigger challenges of recession.

Uwaleke said that there was the need to ease the monetary policy at this time for economic growth.

“I am not surprised that the Consumer Purchasing Index (CPI) has continued to rise in spite of the central bank’s tight monetary policy,” Uwaleke said.
He said that the headline inflation, which was only 9.6 per cent in January, had accelerated to 17.9 per cent in just few months.

“So, there is the need to ease monetary policy at this time to restart economic growth.

“One cannot continue to do something same way and expect a different outcome,” he said.

Uwaleke said that the key drivers of the inflationary pressure such as high cost of electricity, fuel, housing, clothing, books and foods were outside the control of the apex bank.

Uwaleke said that the high interest rate regime encouraged by high monetary policy rate at 14 per cent, in a bid to tame inflation, had neither succeeded in subduing inflation nor led to significant capital inflows.

He said that the high inflation rate would continue to rub off negatively on the stock market because rational investors needed positive returns on their investments.

“With real returns in a continuous negative territory following increasing headline inflation, investors’ appetite for stocks will be dampened.
“My prediction is that the stock market will be largely bearish in the weeks ahead,” he said.

Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., Lagos, said that government and its agencies should re-assess their policies.

Omordion said that government should introduce new economic policies and incentives in form of stimulus packages or bailouts for some critical sectors to revive the economy.

He said many companies were closing down due to the current economic challenges thereby leading to high unemployment rate.

NAN reports that the Nigerian Stock Exchange (NSE), last week, recorded a turnover of 1.16 billion shares worth N9.25 billion in 14,992 deals.

This was in contrast to the 934.91 million shares valued at N6.36 billion transacted in 12,352 deals in the preceding week.

The financial services industry led the week’s activity chart in volume terms by 1.02 billion shares worth N5.89 billion traded in 8,812 deals.

The conglomerates sector followed with 61.57 million shares valued at N141.31 million transacted in 633 deals.

The third place was occupied by the consumer goods industry with a turnover of 33.09 million shares worth N2.02 billion exchanged in 2,642 deals.

Also, the market capitalisation, which opened at N9.561 trillion, rose by N8 billion or 0.08 per cent to close at N9.569 trillion.

The NSE All Share Index appreciated by 25.81 basis points to 27861.03 points from 27835.22 points recorded in the previous week.

Caverton led the week’s gainers’ table in percentage terms by 13.43 per cent or 9k to close at 76k per share.

Seplat came second by 10.25 per cent or N35.88 to close at N385.88 per share, while Transnationwide Express grew by 9.80 per cent or 10k to close at N1.12 per cent.

Conversely, UACN Property topped the losers’ chart in percentage terms by 13.67 per cent or 54k to close at N3.41 per share.

Lafarge Africa trailed with a loss of 9.96 per cent or N4.70 to close at N42.50, while E-tranzact dropped 9.67 per cent or 55k to close at N5.14 per share.

Forte Oil depreciated by 9.24 per cent or N14.78 to close at N145.12, while Pharma Deko lost 9.09 per cent or 17k to close at N1.70 per share.

  • real

    The problem is that the central bank is working against the economy right now. our inflation is not due to excess liquidity, it is due to increase cost of production and importation, which is caused by the high cost of dollars. we have a production price inflation, which would not be solved by high interest rate or tightening of funding.
    The is a need for the central bank to get cheap money out there for the real sector to start producing and to fund a lot of the projects that would reduce our massive importation. The focus should be on increasing local production and reducing massive demand for forex. we have to ensure that our banks are active in the real sector not being lazy by only lending to government via treasury, lending to oil and gas, and sucking states dry of any ability to grow thru their excessive interest rate on loans.
    The focus should be, growth, reduction of importation, real sector funding and strict regulation of forex policies.

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