Nigerian business mogul and Chairman of Heirs Holdings and the United Bank for Africa (UBA), Tony Elumelu, has said that he would take the same exact decisions the Central Bank of Nigeria (CBN) took in its last Monetary Policy Committee (MPC) meeting on February 27 if he was the apex bank’s head.
The CBN led by Olayemi Cardoso, had during the meeting, raised the Monetary Policy Rate(MPR) by 400 basis points to 22.75 per cent from 18.75 per cent as part of its tightening policy of the monetary space.
With inflation at 29.90 per cent, Cardoso said the new MPR was part of moves to tackle the country’s inflation, adding that the Cash Reserve Ratio(CRR) had also been raised to 45 per cent, while the liquidity ratio was left unchanged at 30 per cent.
Elumelu, who also leads Transnational Corporation of Nigeria Plc (Transcorp), in an interview, argued that although it’s still early days in the Bola Tinubu administration, Nigeria was on the right track economically.
However, he stated that the authorities must be consistent and focused in its policies to ensure they yield the expected results in the medium to long terms.
He expressed cautious optimism that Nigeria is ‘getting there’, emphasising that ‘transformation’ takes time and it is therefore the right time to keep going with the current reforms.
Tinubu had announced the removal of petrol subsidy when he assumed office on May 29 and thereafter had begun the gradual collapse of the FX regime to a single market determined by the forces of demand and supply.
“Of all the decisions the central bank took at the last MPC, if I were there, those are the exact decisions I will take in this circumstance. Hopefully, let us continue and not relent. It’s still early days. This is just the starting, but it seems one can be fairly and cautiously optimistic that we’re getting there. We are on the right track,” he assured.
Asked when the value of the naira will start rising substantially against the dollar, the philanthropist stated that “it takes God to say that, to answer that”.
He added: “What I know as a transformation person is that the transformation journey takes time. And, you know it comes with a few initial pains, but (it’s good) to stay focused, stay the course, be consistent, be sincere and be committed to it.
“What I see, you know, I mean fixing the issues, making sure that interest rate is not negative to the investor, making sure that … it’s an inflationary situation and that we’re contracting as much as possible, so that we have fewer Naira chasing dollars, giving confidence to the market.”
In terms of confidence building, he stated that the CBN must continue to reduce its backlog of FX forwards.
“(They need to say) We know we have forwards, don’t worry about these forwards, we will reduce it and continue to do more. I think that it will ultimately narrow or come down, I believe it will. When? I don’t know.
“But I am encouraged as an economist and as an investor, I’m encouraged with what I see. I believe in the medium to long term, this will begin to normalise.
“Do I expect any quick fix immediately? It has started, but I think it will take a bit of time. Medium to long term, I think we will get it right, but the key thing is to get the fundamentals right and not get too populist,” he explained.
To other issues, the Nigerian tycoon whose firms control 15 per cent of the nation’s electricity generating market, according to Bloomberg, urged the government to revamp the power industry, which he said was crucial to revive the struggling economy.
Elumelu, who listed one of his power firms, Transcorp Power Ltd., this week at a valuation of $1.2 billion, said insufficient transmission lines and lack of liquidity in the electricity market are hampering growth in the industry.
The power deficit in turn is stymieing the economy and weighing on the nation’s currency, which has plunged 70 per cent since June.
The currency crisis “is a sign of many things,” Elumelu, 60, told Bloomberg. “As a country, we can’t produce well enough in spite of our natural resources. The reason is lack of electricity,” he added.
Nigeria sends less than a third of the 13,000 megawatt of electricity it generates to the grid, leaving the nation’s 200 million people dependent on home generators.
A solution, according to Elumelu, is for Tinubu’s government to lure investors to develop the nation’s large gas reserves to fuel power stations, and allow the private sector to manage the transmission lines.
The West African nation’s electricity grid delivers only about 4,000 megawatts. South Africa — with a population that’s almost a third the size of Nigeria — has a capacity to produce about 52,000 megawatts, the report said.
Nigeria in 2013 sold about 15 state-owned generators to private companies to improve efficiency while keeping ownership of the transmission lines. But the lack of investment in the transmission assets meant that they are too weak and inefficient to wheel power to consumers.
“Even where you generate electricity, the grid cannot take it, so it’s a problem for us. I am advocating that let us privatise the transmission lines,” he said
The tycoon who also has interests in the oil sector, urged the authorities to ramp up gas supply for power generation by luring more private investors to develop the nation’s more than 200 trillion cubic feet of gas reserves.
“Some institutions have idle gas assets or fields. Government should take some of these and let Nigerians who have the resources and means to invest in gas take them,” he advised.
Emmanuel Addeh
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