…Edun says Nigeria’s macroeconomic environment now stable
Wale Edun, minister of finance and coordinating minister of the economy, says the Federal Government will begin the first issuance of a dollar-denominated security of $500 million in the next three to four weeks.
The minister said the government is eyeing the foreign currency held by Nigerians abroad to stabilise the Nigerian economy.
He said depending on the success of the issue, the government has no plans of raising euro bonds from the international market.
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Edun, who disclosed this during a press briefing in Abuja on Thursday, stressed that it has become imperative for Africa to rely on its resources, including the resources of Nigerians and Africans in diaspora.
“We need to attract those savings and, indeed, we need to attract the savings of Nigerians that keep their money abroad. We have an open exchange rate system. It’s not illegal. And so, we have issuance of a dollar-denominated security, not depending on the financial architecture of the Western world, not depending on the kind of architecture that you use to raise euro bonds.
“We’re using the Nigerian financial system, the Securities and Exchange Commission, the banking system, the investment bankers to issue $500 million in the first instance that will be available and will attract foreign currency held by Nigerians abroad and anybody else who buys into the macroeconomic reform efforts of President Bola Tinubu.
“That issue is a challenge to the best and the brightest in financial markets. It is due to open in the next three to four weeks maximum,” he said.
The minister further hinted that the Federal Government has recorded improvements in its fiscal management, with the economy positively turning the corner, leading to a stable exchange rate and a positive trade balance.
According to him, the Central Bank of Nigeria (CBN) has been proactive in adjusting the monetary policy rate to address inflation head-on in line with its legal mandate, noting that the move is beginning to have its desired effect reflected in the month-on-month reduction in inflation rate.
He further said that the transition by CBN to a willing-buyer, willing-seller model has reduced exchange rate volatility and improved volumes of foreign exchange trading.
“We are optimistic that inflation, despite being sticky at the moment, will moderate soon, due to some of the commitments. Likewise, in terms of what is happening with interest rates, the gap between inflation and interest rates is narrowing. And what that does is it makes the Naira more viable as a store of value and reduces the incentive to switch to non-Naira investments.
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“Therefore, it has improved liquidity and the availability of foreign exchange in the Nigerian economy. And of course, the NAFEX rate and the parallel market rate have converged. We now have effectively one exchange rate. Importantly, the investment climate has improved and this has helped to bring in investment.”
Speaking on the continuous increase of interest rate by the CBN, Edun explained that the apex bank is mandated to not just fight inflation but encourage dollar inflows at elevated rates, explaining that it has made the government rise to the challenge of reducing domestic debt service to support the signaling that the central bank has given for higher rates to encourage foreign inflows.
Olayemi Cardoso, CBN governor, on Tuesday, announced an increase in the Monetary Policy Rate (MPR) by 50 basis points (bps) to 27.65 percent from 26.25 percent, the fourth rate increase this year. This, he said, is part of the efforts to address Nigeria’s inflation, which stood at 34.19 percent in June.
According to Edun, interest rates are the natural and the usual tool that governments around the world use to fight inflation, noting that some of the reforms and interventions should have been adopted a long time ago at a lesser cost.
“Inflation must be fought. You cannot allow inflation to take root in the economy. It destroys the savings of people; it makes it prohibitively expensive in terms of cost of living as well as it makes businesses uncompetitive. So, the number one fight is to fight inflation and that’s what the central bank is doing.
“Let us look at the evidence despite the elevated interest rates that are in place to combat inflation. Credit to the private sector is expanding in agriculture, manufacturing, oil and gas, power and construction. The financing credit to the private sector is growing and that gives you an idea of how investment can grow and support economic growth despite elevated interest rates.”
Edun further noted the impediments to the implementation of the Supreme Court ruling on local governments autonomy, including the need to hold local government elections because the funds have to go to elected governments.
“There was a Federal Account Allocation Committee meeting just last week, but it could not yet be implemented because, in fact, the actual proceedings have not been handed down. They were not in the hands of the attorney general for him to start implementing,” he said.
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Recall that in May, the Federal Government, through Lateef Fagbemi, attorney-general of the federation, sued 36 state governors over alleged misconduct of local government funds following increased calls for local government autonomy, a move supported by President Bola Ahmed Tinubu.
In its judgement, the apex court ordered the Federal Government to immediately pay local government allocations to exclusive accounts belonging to local councils as against the joint account operated with state governments.
