Amidst tight foreign exchange supply, Board members of the Central Bank of Nigeria have called for a harsh approach to dealing with ‘dollarization’ of the Nigerian economy.
The call was made in the personal statements of members of the Monetary Policy Committee delivered at their 144th meeting held in Abuja.
A member of the board of the CBN, Obadan Idiahi, said in his statement that there was a strong need to recognize the economic crisis in the country and embrace strong reforms.
Nigeria is facing tough foreign exchange crisis which had dragged the Naira to N880 to a dollar.
The Naira is currently trading around N730 to a dollar after global drop in the US dollars due to a weaker-than-expected United States Consumer Price Index last week.
Currency changers at the parallel market had told THE WHISTLER that many Nigerians have begun to hoard the dollar as hedge to the country’s surging inflation which rose to 20.77 per cent in September.
Some airlines have begun to accept dollars for local trips as forex scarcity had affected their payments for insurance and servicing of aircrafts.
Idiahi said, “On its own part, there is the compelling need for the CBN to introduce strong measures, which though may be tagged by some people as harsh, to check the trend of dollarization of the economy and the large volumes of cash floating in the economy with serious implications for inflation and exchange rate stability.”
He said the fiscal authority needs to complement the measures that the CBN had put in place by reviewing the structure of public spending to bring down expenditure on non-essential goods and services.
Idiahi called on the fiscal policy makers to “Effect a drastic cut in the emoluments of political office holders including members of the legislatures, suspend all unnecessary foreign travels which put pressure on the nation’s highly limited foreign reserves and the naira exchange rate.
“Similarly, review the merchandise import structure to ensure that only imports of merchandise that cannot be produced in the country benefit from official foreign exchange.”
He called on the government to “Provide political support to the CBN to review access to foreign exchange for invisibles; to this end, official foreign exchange should be suspended for school fees for new students while foreign exchange access for existing students should continue until they graduate.
“Under the situation of economic crisis in which the country currently is, it will not be out of place to review the Basic Travel Allowance (BTA) downwards while only critical cases of illness should benefit from official foreign exchange.”
In his personal statement, Adenikinju Festus, member of the MPC criticized the Federal Government’s penchant for borrowing as he said it is stifling availability of credit to the private sector.
The MPC member expressed worries that the borrowing is also compounding the rise in prices of commodities.
Nigeria’s public debt is $ 103.3bn or N42.8trn as of June 2022, according to the Debt Management Office.
The Nigerian government has borrowed over N20trn from the CBN through Ways and Means.
Festus said, “The continuous borrowing by the Federal Government is also likely to weigh much on money supply, inflation rate and availability of credit to the private sector and monetary policy transmission.
“Fiscal deficit as at the first six months stood at N4.16trn. This was 59 per cent higher than the budget estimates of N2.62trn for 2022. The rise in fiscal deficit also translates into increase in Public Debt which stood at N42.8trn as at June 2022.
“We should be concerned about debt sustainability. There is a genuine fear that Nigeria may be moving towards a debt trap.”