Association of Bureaux De Change Operators of Nigeria (ABCON) has called on the Federal Government to reprioritise its spending to cushion the impact of higher inflation, weaker economic growth, and tighter financial conditions.
ABCON cautioned the government against policies that can worsen the impact of the upward inflationary trend on the populace.
The association stated this in its quarterly economic review for the second quarter (Q2) of 2022, in which it noted the impact of the sharp rise in commodity prices triggered by the COVID-19 pandemic and the Russia-Ukraine war.
“Nigeria needs to balance fiscal sustainability with the need to mitigate the effects of these overlapping crises on the poorest citizens. The excruciating pressure on commodities, especially oil and gas is not exonerating the poor in Nigeria,” ABCON said.
“Galloping energy prices as being witnessed in Nigeria, with lower real incomes, increased production costs, tightened financial conditions and constrained macroeconomic policy.
“Under these prevailing circumstances, the government must avoid all distortionary policies such as multiple taxes, subsidies, and all fiscal tightening, which could worsen the recent increase in commodity prices”, the association added.
Against this background, ABCON called on the government to reprioritise its spending with emphasis on targeted reliefs for vulnerable populations.
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Such reliefs, ABCON explained, should include comprehensive harmonisation of all local, state and federal government taxes which currently impose a heavy burden on the citizens.
It said there was a need for the government to be deliberate about monetary policy to optimise interest rates and stimulate savings, investments and production. The association also tasked the government on better coordination of monetary and fiscal policies to avoid conflicting effects detrimental to set objectives.
ABCON also noted the persistent depreciation of the naira since the beginning of the year, warning that this trend will increase the debt service burden of the country and thus undermine the nation’s credit risk, impede foreign capital inflows into the country and increase the debt service burden on the country.
“The trend of depreciation of the exchange rate of the local currency is a serious cause for concern to all stakeholders in the economy. Large swings in the exchange rate, and especially large depreciations, can destabilise prices and can do so in non-linear and even discontinuous ways as it is currently doing in the Nigerian economy. “Monetary stability, usually accompanied by at least moderate exchange rate stability in the medium term, is the cornerstone of orderly economic activity.
“The current trend of increased depreciation of the value of the currency against increased debt servicing burden increases borrowers’ credit risk, works against more capital inflows and tightens financial conditions,” the operators said.
