Governor of the Central Bank of Nigeria (CBN) at the weekend, restated that the apex bank will continue to keep strong focus on price and banking system stability, especially as global concerns heighten on inflation and possible spillovers from some failed banks in the United States.
Emefiele gave the assurance in Washington on the sidelines of the on going spring meetings jointly convened by the International Monetary Fund (IMF) and the World Bank.
The meetings come at a time of high global uncertainty with successive shocks of the war in Ukraine, rising inflation, fragmentation and monetary policy tightening and most recently the financial market stress on the Silicon Valley Bank, Signatures Bank and Credit Suisse Bank. Top of the concerns at the meetings is the huge poverty levels, with some 345 million people in Developing countries facing acute food insecurity.
“We all know that the global economy still faces a lot of challenges. We are not going to remove our eyes on monetary policy, which is to focus extensively on how to moderate inflation, but at the same time, ensure that banking system stability remains resilient and then strong as it is right now,” the CBN governor told journalists covering the meetings.
According to him, the issues bothering global challenges were consistently highlighted, both at the statutory meetings and some of the private meetings that were held.
He recalled how post-COVID, the global economy was beginning to recover quite aggressively. Interest rates were low for a sustained period of time, including inflation particularly in the Euro and the developed economies which has also been low.
Unfortunately, as a result of challenges that came up in 2022, Russia- Ukraine war, high-interest rates and inflation in the US, and the need to continue to raise interest rates and its impact on other economies, the world has got to where it is today, he added.
“The forecast at the meeting remains that a lot of work has been done in 2022, and growth is gradually returning again, but it is still at the sub-optimal level. Inflationary pressures continue, and even though it is coming down as a result of measures being taken by monetary authorities, it still remains at very high levels to the extent that global inflation is projected at 7 per cent which is very high,” Emefiele said.
“So the high point of all the consequences of what we’ve seen in 2022 is that poverty which was very well discussed here has risen quite astronomically and over 700 million people are being struck.
“Food insecurity has also risen quite tremendously to the point that over 350 million people globally are hit by extreme food crises all over the world.”
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Emefiele also re-echoed the IMF concerns about debt and lending portfolios reaching all-time highs.
In two decades, the IMF has seen in the highest level of debt portfolio in its books and is now warning that it may not be in a position to do much for countries that really require more debt to be able to restructure their balance sheet and then keep going on.
“So, the focus remains that monetary policy and authorities must continue to focus on inflation so as to bring it down.
“While monetary authorities are doing their work to bring down inflation, they must also keep their eyes on banking systems’ stability, through monitoring, supervision, and regulatory frameworks and the rest,” he noted.
Speaking on the fiscal aspect, Emefiele stated that though the IMF insists that countries need to reduce their spending because of the limited space, he would rather recommend raising revenues.
“In my opinion, I will say well if you want to spend, then raise revenue to be able to spend.
“I think it’s important that you must raise revenue and not get yourself constrained in an environment where there is no debt, where financial market conditions are very tight and limited, and where interest rates are high and could create a lot of burden for economies and the only option for fiscal in this case is to expand the revenue base so as to be able to spend.”
Emefiele was, however, elated by the fact that despite the global turmoil, the IMF had retained its 3.2% growth forecast for Nigeria as he assured that authorities would sustain recent policy directions.
The IMF, in its latest World Economic Outlook (WEO), retained earlier 3.2 percent forecast for Nigeria in 2023 – though it dropped the 2024 projection from 3.1 percent to 3.0 percent. The World Bank on the other hand, dropped its forecast to 2.8 percent from 3.0 percent.
According to Emefiele, retaining its 3.2 percent forecast for 2023 means that the IMF is endorsing the policies the monetary and fiscal authorities have put in place in recent times to contain series of shocks from the global economic space on the back of the war in Ukraine and the global financial crises.
“We are delighted that even in Sub-Saharan Africa, the growth levels in Nigeria, even though by our assessment is still sub-optimal, the IMF would among all the countries in Africa retain forecast for Nigeria at 3.2%.
“This gladdens our heart, it means we are doing certain things that are correct, and we’ll continue to do those things that are right. But it also means that we are not going to remove our eyes on monetary policy, which is to focus extensively on how to moderate inflation, but at the same time, ensure that banking system stability remains resilient and then strong as it is right now.”
