By Blaise Udunze
FINANCE experts have urged Nigeria’s newly appointed Finance Minister, Mrs. Kemi Adeosun, to work out a co-ordinated policy framework with monetary authorities to respond to the macroeconomic challenges of slow growth, heightened inflationary pressure, declining reserve buffers and exchange rate uncertainty.
President Muhammadu Buhari had last week, sworn in Adeosun, an investment banker and immediate past Commissioner of Finance in Ogun State, as Minister of Finance.
But analysts at Afrinvest West Africa Ltd., while commenting on challenges ahead of the nation’s economy, noted that the fact that the appointments were delayed for five months in a period of deteriorating macroeconomic fundamentals, set expectations high for the new finance minister and other members of Buhari’s economic team.
Researchers at the firm, in a note made available to Daily Sun, at the weekend said, “important policy decisions lie ahead and the market would expect the finance minister to work out a co-ordinated policy framework along with monetary authorities to respond to the macroeconomic challenges of slow growth, heightened inflationary pressure, declining reserve buffers and exchange rate uncertainty.”
Mrs. Adeosun had during her screening at the Senate Chambers, backed the Central Bank of Nigeria’s (CBN)’s foreign exchange administrative measures in the FX market, along with President Muhammadu Buhari, who at the swearing- in ceremony also restated his support for the CBN.
The President had stated: “The CBN has also implemented country-specific and innovative policies that have helped to stabilise the exchange rate and conserve our reserves.” But according to analysts, it remains to be seen how the current CBN’s strategy will be balanced with the expected expansionary Fiscal 2016 Budget.
Already, investors in the fixed income market are now pricing in a possible tightening of liquidity by the CBN post-cabinet inauguration, resulting in sell-down pressure across FGN-bond tenors towards the end of the week.
“Although there has been no official communication from the CBN on resumption of OMO auctions, we do not foresee any monetary policy tightening in the short-term given the deteriorating macroeconomic fundamentals,” they noted.
With this development, however, Afrinvest projected that the third quarter GDP growth figures would likely be below the 2.4 per cent recorded in the 2nd quarter.
“Administrative FX measures have pushed many importers to the parallel market where the exchange rate is more expensive and we expect a pass-through effect on consumer prices for October.
“Given this, a tighter monetary policy and continued use of administrative tools in managing FX (affecting businesses) will worsen growth profile. Hence, we remain bullish on the fixed income market as we expect liquidity to remain robust.
Source : SunOnline