Dimon: Nigeria's Tough Decisions for Growth
*Shettima: FG to adopt economic summit recommendations to drive reforms
*Tinubu halted economic decline, Bagudu argues
*World Bank's chief economist says failure of Tinubu's policies will set back reforms in Africa*Opines nation's economy at turning point
Emmanuel Addeh and James Emejo in Abuja
The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has argued that curbing inflation remains a critical priority for the current administration, explaining that only then will the Nigerian economic have some level of stability.
Speaking at the 30th Nigerian Economic Summit (#NES30) in Abuja, the CBN governor stressed that the general rise in the prices of goods and services is one of the most pressing challenges facing Nigeria at the moment, stressing that it was negatively impacting households and businesses.
This comes as Chairman/Chief Executive, J.P. Morgan Chase Co, Mr. Jamie Dimon, warned that inconsistent economic policies only serve to scare investors from any country. Dimon also warned against excessive regulatory activities.
Also, Vice President Kashim Shettima, said the federal government will await the Green Book recommendations from the just concluded 30th Nigerian Economic Summit (#NES30), assuring participants and the business community that its implementation will be prioritised to further drive ongoing reforms to boost the growth of the economy.
Shettima and Dimon also spoke at the just concluded summit in Abuja.
According to Cardoso, inflation management is essential to stabilising the economy, fostering investment, and protecting the purchasing power of Nigerians, particularly in a period of significant global economic turbulence.
He said: "The monetary side is there to more or less create some stability. But it doesn't substitute for the fundamentals. It does not. So, we have a situation where, from our perspective, taming inflation is key.
"Taming inflation is key. Because if you do not tame inflation, it has such a major throwback. It can deter investment," he argued.
While highlighting that efforts to curb inflation would inevitably involve economic trade-offs, Cardoso explained that the apex bank was committed to making informed decisions on monetary policy, balancing inflation control with the need to support growth in critical sectors.
But he insisted that this approach requires sacrifice, as the country grapples with rising prices, made worse by a depreciating naira, subsidy removal, and the impact of the pandemic as well as global supply chain disruptions.
Cardoso stressed that there was the need for coordinated fiscal and monetary policy particularly in the context of Nigeria's high debt servicing costs, which he said have constrained the government's ability to stimulate growth.
He emphasised that monetary tightening alone cannot solve the inflation problem, urging fiscal authorities to ensure that government spending is efficient and well-targeted.
While acknowledging the public concerns about rising food and fuel prices, the CBN governor pointed out that short-term pain was necessary to achieve long-term price stability in Nigeria.
For Cardoso, managing inflation will create the conditions necessary for sustained growth and job creation, adding that achieving lower inflation is essential to reducing poverty and inequality in the country.
The CBN governor however assured that the bank remained committed to stabilising the economy and macroeconomic parameters to serve the wellbeing of all Nigerians.
The CBN governor told the audience that taking control of inflation was key, stressing that if the country does not address inflation, it significantly impacts investment and purchasing power, affecting those engaged in productive activities.
"Ultimately, we expect that the trade-off between the real economy, high interest rates, and inflation will be manageable, and we hope for a positive outcome," he assured.
Cardoso also blamed past administrations for failing to diversify the Nigerian economy, a price he said the country is currently paying.
Cardoso added: "I also believe that we need to acknowledge our past mistakes. We missed opportunities to diversify our economy, and now we face challenges because of it. Diversifying would have helped mitigate some of the economic shocks we've experienced.
"But we are on the right track, and with the right focus, we will overcome these challenges. I believe Nigeria has the potential to stand strong, and we must continue on this path."
Cardoso insisted that CBN policies were steering the country in the right direction, adding that international financial institutions, including the European Union (EU) and rating agencies all agree that Nigeria is making progress.
He said: "We are in a situation where excessive interventions have persisted for several years. Our focus must be on managing inflation and stabilising prices, and collaborating with partners is essential. When I first spoke about this during my clearance for service, I highlighted the huge backlog and financial issues. Now, we are in a position where we must manage inflation and immediate demand effectively."
The central bank governor said the apex bank had refined the payment processes, as well as working on verifying the payments, adding that it was crucial to ensure that transparency is maintained in its operations.
The apex bank's governor said openness, transparency, and accountability remained the goals of the apex banks.
He said a lot of foreign investors were paying attention to what Nigeria is saying and are eager to understand the challenges the country faces.
Commenting on the issue of subsidies, he said that on the surface, it may seem straightforward, but when one considers the last 10-15 years, things have changed significantly.
"It may have appeared that we didn't anticipate certain changes, but based on the data and the rise in home prices, I believe it's clear that we've made the right moves," the CBN governor added.
On the banking industry consolidation, Cardoso said: "This is something we've anticipated. We believe that costs will shift in certain directions, and while some may not see it immediately, we're confident in our approach.
"However, there's no denying the challenges we face, and we must implement mitigation strategies. If industrialists and service providers are not empowered to continue delivering, we will be in a difficult situation. Mitigation is critical, and it's something we've discussed and recommended. We must act on this."
But in his intervention, first on a sideline interview with Arise News Channel, the Chairman/Chief Executive, J.P. Morgan Chase Co, Mr. Jamie Dimon, acknowledged that Nigeria was making very tough decisions that will create economic growth in the future.
"They (Nigeria) have made some very tough decisions which are hard but they will create growth in the future; more stability more growth. It is very smart what they have done. The fintech launch, you have a lot of talents here. They have built several unicorns here.
"These 220 million people is going to grow rapidly, with schools and education and I am very optimistic. We are proud to be here and you will be seeing more of us," he stated.
However, separately, at the event, he warned that inconsistent economic policies only served to scare investors from any country. He said Nigeria must ensure consistent laws, and effective regulatory, legal environment to incentivise foreign investors to the country.
Speaking during the fireside chat in the IV plenary of the summit, Dimon pointed that JP Morgan had wanted to expand to Nigeria in the past but was advised against it by the US government over 'unfriendly conditions'.
He stressed the need for a healthy financial system without which failures can be assured, noting that it was important for the US to expand into Africa by encouraging US companies to set up in the continent to support growth.
He said while technology and Artificial Intelligence (AI) remained key to modern society, it was important to have a healthy financial system to guarantee a healthy economy.
"One reason I like to be here is that America should play a very healthy part in expanding into Africa, helping African nations through diplomacy, business, foreign investment, education--all those things that can actually help countries do better," he argued.
According to him, anywhere in the world, a healthy financial system usually indicates a healthy economy, noting that even with the coming of fintechs, he wasn't worried about competition.
On regulation, he said: "Regulators obviously want a healthy system. If the financial system collapses, it's terrible for a country. So I think it's reasonable that regulators are always trying to ensure safety and soundness.
"However, some of the safety and soundness measures are quite basic. Many regulations go beyond that in terms of safety and soundness.
"In the United States, we have healthy banks, but regulations have taken on social causes and a host of other issues that may not promote a better system. If I were a regulator, I would always be asking financial companies what works and what doesn't, and what prevents them from banking people.
"I just got here, so I haven't had a chance to talk to many people and get up to speed on what's happening in your country. In the United States, many banking regulations have made people unbanked. We struggle to explain this to senators, congressmen, and regulators.
"Their regulations drove people out of the banking system. Being in the banking system is a healthy thing. Here, about 40 per cent of people are unbanked, and many fintech companies are trying to reach out to that demographic. Getting them into the system is beneficial; it's much cheaper and safer for them."
He argued that regulations should always consider what the desired outcome is, arguing that often, rules and regulations are passed out of anger or based on simplistic ideas, but can have adverse consequences.
Meanwhile, declaring the summit closed, Shettima said the federal government will await the Green Book recommendations from the summit, assuring participants and the business community that its implementation will be prioritised to further drive ongoing reforms to boost the growth of the economy.
The vice president, who was represented by the Minister of Budget and Economic Planning, Senator Abubakar Bagudu said the government will continue to collaborate with the NESG to organise future summits, pointing out that the summit had lived up to its billing.
He said: "Over the last three days, this summit has facilitated deep and meaningful conversations among public, private, and civil society leaders.
"Together, we have created an environment of mutual respect and dialogue. This understanding has informed our engagement with the summit process, which has generated many policy recommendations for government action."
The vice president pointed out that like the previous summits, this year's summit had recorded a huge success not because of the high turnout of delegates but because the plenary and concurrent sessions addressed the key issues that will guide Nigeria's economic growth and development.
Speaking to THISDAY on the sidelines of the summit, Bagudu in his own capacity, said President Bola Tinubu had been able to reverse the nation's economic decline in recent times through targeted reforms.
He said the implementation of governance and institutional reforms had helped improve macroeconomic performance.
The minister said: "Our overall Gross Domestic Product (GDP) has been enhanced from 2.98 per cent in Q1 2024 to 3.19 per cent in Q2 2024, compared to 2.31 per cent in Q1 2023 and 2.51 per cent in Q2 2023.
"Inflation is trending downwards from 33.40 per cent in July 2024 to 32.15 per cent in August 2024, while our external reserves are $39.07 billion as of September 19, 2024. Our external trade balance improved to N6,945.4 billion in the second quarter of 2024."
"These are testaments to the efficacy of the government reform agenda. The economy is moving in the right direction, and the decline has been arrested. Therefore, we seek cooperation and understanding of the broad spectrum of the citizenry as there is indeed light at the end of the tunnel."
He also said the active participation of stakeholders at the summit demonstrated their commitment to working closely with the government to take collaborative action for growth, competitiveness, and stability.
Meanwhile, the Chief Economist and Senior Vice President for Development Economics at the World Bank, Indermit Gill, yesterday pleaded with the Bola Tinubu administration to ensure the success of the current economic policies, opining that failure would mean a setback for reforms generally in sub-Saharan Africa.
Writing for the Financial Times in a piece titled: "Nigeria's Economic Transformation Must Succeed," the top World Bank official noted that though many might be scoffing at the idea that Nigeria just might be on the cusp of turning its economic fortunes around, yet the largest economy in sub-Saharan Africa might just be at a turning point.
"Nigeria's economic transformation must succeed. Failure would set back the cause of reform across sub-Saharan Africa," he maintained.
Since the 1980s, when oil prices collapsed, Gill stressed that the country had been mired in one crisis after another, but expressed the hope that things could be looking up again for the world's biggest black population.
According to him, over the past year or so, the Nigerian government has implemented major, politically difficult reforms, pointing out that although no large-scale reform process is ever perfect, but this one must be allowed to succeed as Africa's future hinges on its success.
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The World Bank Senior VP opined that an economic turnaround in a country with more people in poverty than almost any other would be a game-changer for market-orientated reforms across the continent.
"Consider the scale of the reforms implemented so far. Nigeria now has a market-determined exchange rate, having unified official and parallel exchange rates. Previously, the government had been losing the equivalent of 38 cents for every $1 of government oil export proceeds.
"This benefited some local elites, who acquired dollars cheaply at the government's expense. The unification also got rid of a hefty implicit tax on agricultural and manufactured exports.
"Costly and regressive petrol subsidies are also being cut. This will help to strengthen Nigeria's historically shaky public finances and restore the naira as a credible currency.
"Implementing such far-reaching change is impossible without political commitment from the top. The price of petrol in Nigeria has quintupled since the subsidy cuts, imposing terrible hardship across society. To boost confidence in the naira and anchor inflation expectations, the central bank has had to raise its policy rate by 850 basis points in the last nine months. Central-bank financing of fiscal deficits has finally ended.
"Yet the hard part has only just begun. Nigeria will need to stay the course if it is to become an engine of growth in Sub-Saharan Africa. Although the historical record isn't encouraging -- previous reforms have been rolled back by the elite -- policymakers will need to focus on three critical areas in particular," Gill wrote.
He listed the core areas of focus as non-oil growth, helping the vulnerable households cope with inflation and establishing a climate in which private businesses can flourish.
"First, they should prioritise non-oil growth. This requires a competitive exchange rate, which Nigeria now has. To protect the poor and maintain competitiveness, the central bank must maintain its focus on inflation.
" It should resist the lure of volatile short-term capital inflows that might push up the naira's value too quickly and stifle non-oil growth in the process. And it should rebuild foreign-exchange reserves as a cushion against oil-price and exchange-rate volatility.
"Second, Nigeria must help vulnerable households cope with inflation, which is still high. The government is rolling out a large-scale targeted, temporary cash transfer programme. It should also establish a cost-effective safety net to protect the most vulnerable.
"The third and final priority is to establish a climate in which private businesses can flourish. Nigeria's need for jobs is immense. Today, less than 14 per cent of working Nigerians enjoy a predictable, fixed wage," the World Bank official explained.
In the next 10 years, the number of Nigerians entering the workforce, he said, is set to increase by more than 12 million, opining that generating the requisite number of good jobs will depend on sparking large-scale domestic and foreign private investment in the non-oil sector.
According to him, Nigeria's government deserves the world's support in this endeavour.
"Failure in Nigeria would set back the cause of reform across Africa, besides ruining the prospects of yet another generation of young Nigerians. The country's elites must forge a political consensus in support of these reforms, because their long-term interests lie in a broadly prosperous and stable society.
"For its part, the international community should do everything in its power to help the government succeed," Gill stated.
