MPC Member Laments ‘Problematic’ Fiscal Policy in Economic Management
•Says reliance on monetary accommodation to enhance fiscal operations costly to economy
•Urges CBN to moderate further financing of FG, conclude on securitisation of govt’s exposure to apex bank
James Emejo in Abuja
A member of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) has lamented the failure of the fiscal authority to measure up to expectations in complementing the monetary side to address macroeconomic challenges confronting the country, particularly inflation.
According to Dr. Adenikinju Adeola Festus, the, “fiscal side remained problematic” in achieving price and monetary stability.
Festus, in his personal statement during the 145th meeting of the committee in November, said from January to September 2022, three months to the end of the year, revenue actualisation remained 35.8 per cent of the budget projections for 2022, while expenditure actualisation was 59.99 per cent of the expenditure projection for the year.
He further noted the budget deficit was 0.78 per cent above the budget estimate of N6.38 trillion for 2022, adding that total public debt also rose by 2.98 per cent to N42.85 trillion at end-June 2022.
As a result, he said the apex bank should moderate further financing of the federal government and conclude on the securitisation of the FGN exposure to the CBN.
He said, “The worsening fiscal balances should also be addressed. Most indicators of fiscal balances are in red. The reliance on monetary accommodation to enhance fiscal operations is costly to the economy both in the medium and long term.
“The revenue challenges of the government should be confronted headlong. The bank (CBN) should moderate further financing of the federal government and conclude on the securitisation of the FGN exposure to the CBN. In addition, the issue of oil theft and vandalization of pipelines and other government assets must be urgently addressed.”
Also, in his statement, another member of the MPC, Mr. Adamu Lametek, said fiscal activities were expected to gather momentum in the next few months as the present political administrations at the federal level and in many states try to complete ongoing projects before May 2023, when they would be handing over to succeeding administrations.
This, he said, “further complicates the outlook for system liquidity and deserves to be a part of the policy calculations from the monetary side of economic management.”
Also, commenting on the inefficiencies of the fiscal side towards better management of the economy, another member of the MPC, Asogwa Robert Chikwendu, lamented the increases in the government’s spending amid low revenue.
Chikwendu said, “The domestic fiscal risk remains elevated on the back of an unapproving government revenue position, which is similar to the situation during the last MPC meeting. With considerable increases in government expenditure in the midst of low revenue as at September 2022, the overall debt stock keeps ballooning.
“As at September 2022, the country’s total debt as reported by the Debt Management Office had reached over N44 trillion with debt servicing costs also at alarming levels. Clearly, attempts at limiting the size of the fiscal deficit through some expenditure wisdom will certainly rebalance the risk.”
On his part, the CBN Governor, Mr. Godwin Emefiele, in his personal statement noted that while the Nigerian economy had remained resilient, its prospects were susceptible to global shocks and domestic imbalances.
He pointed out that though short-term growth output is positive, inflation expectations remain unacceptably high.
Emefiele, in his submission, said, “It is thus imperative to maintain coordinated and decisive policies to tackle inflation and inflation expectations. I note that the current trajectory of inflation seems to be flattening reflecting the dampening effect of recent monetary tightening and other supply-side actions of the CBN.
“Yet, the current level of inflation is not conducive to growth. Failure to adequately tackle inflation threats now will entrench it at high levels and detrimentally normalise expectations. This will harm economic growth in the long run and depress potential output while concurrently blunting the efficacy of macroeconomic policies.
“Accordingly, I support strong disinflation measures, at this time, in order to attain price stability conducive to growth. I reiterate that current inflation is higher-than-desired and needs to be curbed decisively, even as I acknowledge the attendant GDP loss.”
