International Monetary Fund (IMF) Country Chief in Nigeria Mr. Scott Rogers, has warned the federal government against removing the autonomy of the Central Bank of Nigeria (CBN), saying it would erode the monetary policy gains achieved in the economy.
Rogers gave the warning at a media briefing on the latest IMF sub-Saharan Regional Economic Outlook with focus on the Nigeria economy. The National Assembly is seeking to amend some vital sections of the CBN Act 2007, which grant administrative and instrumental autonomy to the apex bank in the management of the economy. So far, a bill proposing to disqualify the office of the CBN Governor from being chairman of the bank’s board has scaled through second reading.
The bill also seeks to bar the bank’s deputy governors and directors from being appointed members of the CBN board.
“The IMF has always advocated for strong, independent central banks; we think that provides them with the autonomy to de-politicise their policy actions. Without a strong independent central bank you do not have an independent monetary policy everything becomes dependent upon the budget alone.’’
Rogers said the tightening of the country’s monetary policy by CBN had resulted in increased external reserves for Nigeria. Nigeria’s external reserves increased to $38.72 billion as at May 17 from $36.66 billion, as at the end of April, representing 18.63 per cent increase over the figure as at December 2011. The CBN attributed the increase to favourable commodity prices, inflows of capitals in response to the removal of restrictions on repatriations, high domestic interest rate, and stable exchange rates.
“As you can see, without the Central Bank’s ability to do what it is doing now, reserves will still be falling. It’s s primarily because of the Central Bank tightened monetary policy that the reserves are rising; there was a role also played by the fiscal consolidation.’’ The IMF chief urged the apex bank “to hire the people it needs and remunerate them competitively” and also to modernize its operations to enable it to manage payments and financial institutions effectively. Rogers said the allocation made for fuel subsidy in the 2012 budget was not sustainable because of the hike in the international price of oil and the euro zone debt crisis.
It will be recalled that the federal government earmarked N656.3 billion for fuel subsidy this year in addition to the N231.8 billion provided in the budget for the payment of the 2011 subsidy arrears, adding up to N888.1 billion. “But one aspect of spending that Nigeria cannot control under the current arrangement is the fuel subsidy. The fuel subsidy we say is indulgence; you set the price at N97 (pump price of petrol), if the world price is N97 there is no subsidy. But the oil price isn’t N97 and the higher that price goes the more the subsidy is.’’
Meanwhile, in its latest Regional Economic Outlook, IMF forecast that Nigeria’s GDP will grow above seven and half per cent in 2012, from its 2011 projection of 7.2 per cent.
It also predicts a lower rate of six and half per cent in 2013, a development which it said would be influenced by the eurozone debt crisis and jumps in the international prices of oil. “In Nigeria, non-oil GDP growth is expected to ease somewhat this year, reflecting tighter fiscal and monetary policy, though with some rebound in oil output, overall GDP growth should remain around seven per cent,’’ the report said.