Chief Executive Officer of CFG Advisory, Tilewa Adebajo, has said that the only body in Nigeria responsible for managing inflation and interest rates is the Monetary Policy Committee, explaining that this is why there is a clear separation of roles.
He said this in an interview with Arise News on Monday, clarifying the responsibility for managing inflation in Nigeria, “Let’s put this matter of inflation to rest once and for all. The only body in Nigeria responsible for inflation and interest rates is the Monetary Policy Committee of Nigeria, and that is why we see that separation.”
He emphasised that both the presidency and the public share a common desire for low inflation, as it is essential for economic growth.
“So while the presidency might desire, we also desire low inflation because with low inflation we can grow the economy.”
Adebajo reiterated the need for a comprehensive understanding of the economy to guide the National Assembly’s deliberations.
Adebajo stated, “What is important first is that let us dimension the economy. The economy consists of the households—who we don’t talk too much about but are bearing the brunt. It consists of the formal sector, which is the enterprise and contributes about 50% of our GDP, and the informal sector.
“It also constitutes the government, which is where we spend all of the emphasis on.”
He further elaborated on the interplay of the financial system, saying, “In between our economy is the financial institutions and the financial market, which act as the intermediary, and the third leg is the global market.”
Addressing the government’s spending relative to Nigeria’s GDP, Adebajo remarked, “If you take a look at the government budget, it is about $30 billion, which is only 15% of our GDP. In reality, the impact of government in terms of their spending has minimal impact on the GDP of Nigeria.
“Households have significant spending power and contribute about $35 billion. Combining that, you are looking at $60 billion to $65 billion out of a $200 billion GDP.”
Adebajo highlighted the challenges faced by Nigerian businesses due to high borrowing costs. “The problem is that government controls policy. The firms are suffering because interest rates at 30% cannot support production on a sustainable basis, but these interest rates are needed to be able to tame inflation in the short run,” he said.
He stressed the need for the government to reassess its fiscal policies, stating, “We must dimension the government budget and understand that the burden the government is putting on the Nigerian economy includes their policies and the fact that the debt profile of the government is going too high.”
Adebajo underscored the importance of directing attention to critical areas of the economy. “What’s important now is, where are the prospects for exchange rate stability, investments, and growth? That is where we really need to get the government to focus on is to improve the prospects of economic growth, employment, exchange rate stability, and putting in the right policies.
“Policy is also as effective as a lot of the expenditure we have been talking about,” he noted.
Discussing the role of state governments, Adebajo called for better alignment between federal and state policies. “The governors have to be able to tie in to the policies of the federal government to understand what they need to do,” he explained.
He added, “What is the state contributing to healthcare, to security so that it’s a 50-50 thing? Each state should be able to liaise with the federal government to know what they are going to do, and I think that’s where the gap is in terms of coordination as to how to spend the budget, because they both have budgets for agriculture and everything.”
He concluded by emphasising the importance of collaboration, saying, “It’s the coordination at the sub-nationals with the federal government that is needed to make a significant amount of impact.”
Boluwatife Enome
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