One of the focus of the fiscal policy roadmap of the present government is to “strengthen fiscal/monetary handshake” with focus on deliberate collaboration of fiscal and monetary authorities on policies that will increase the supply of US dollar while also reducing its demand.
The Federal Government N-power program and the London and Paris club refund are two important expansionary fiscal policy programs that is targeted at providing the much needed liquidity in the hand of unemployed and salaries in the hand of civil servants that have been owed salaries for months.
The recent Foreign Exchange availability and subsequent awash by the Apex bank in the attempt to meet up with the demand for invisible transactions while also providing enough FX for both forward and spot LC transactions could not be alluded to the result of the fiscal roadmap or any other deliberate policy achievement. It is the direct impact of the calm in the Niger Delta and the stable price of crude oil in the international market.
Paris club refund
The monetary policy committee chaired by the CBN governor in its meeting on Tuesday held the monetary policy rate at 14% apparently in respond to the 2 digits inflation rate against the targeted 6 to 9%. According to the CBN governor “Price pressures continue, and loosening would exacerbate them while tightening would portray the bank as insensitive to concerns about growth”.
This decision of the MPC is coming at a time when inflation eased to 17.8% in February after it rose to a 15 years high of 18.84% in November 2016. The ease of the Nigerian inflation rate can only be an indirect impact of stable price of crude oil and the ability of the country to increase crude oil production owing to peace in the Niger Delta and the subsequent effect of availability of FX for importers of raw materials for production. Inflation rate can only continue to go down as long as FX is available to manufacturers who are heavily dependent on importation for their productions.
Paris club refund
The policy handshake between the fiscal and monetary authorities is a much needed collaboration for a country like Nigeria that lacks but needs economic direction. The Nigerian economy is currently running on “by Gods grace”or better still “laissez faire” and policy collaboration can only assist the market to move faster in the direction that the freehand moves it.
The recession that the Nigerian economy plunged into several months ago was not as a result of deliberate economic mismanagement by the Buhari government but as a result of fall in international price of crude oil and the unrest in the Niger Delta. The current and obvious recovery as postulated by the world bank and other relevant agencies can only be alluded to same causes.
The policy direction of this government after recovery is to push for increase in our external reserve and sovereign wealth funds and also invest heavily in infrastructures and economic diversification so the country may have enough capacity to withstand fall in oil price in future.