Abuja – The Chief Executive Officer, Time Economics, Mr Ogho Okiti, said what Nigeria needed to drive growth in the economy were strong fiscal polices rather than monetary policies.
Okiti was reacting to the decisions of the Monetary Policy Committee meeting to raise the Monetary Policy Rate from 12 to 14 per cent in an interview with the News Agency of Nigeria on Wednesday in Abuja
He said that people were criticising the MPC for its decisions, forgetting that the managers of the economy were expected to formulate strong fiscal policies to back monetary policies for growth to occur.
“The truth is that the monetary policy committee has virtually exhausted their options to support growth. Growth must now come from the fiscal authority.
“So when you talk about growth now, the question should go to the managers of the economy not the managers of monetary policies.
“This is because the question of growth should be about investments, consumption; it’s about incentives and reforms. Those are the things that will bring out growth.
“What else could they (MPC) have done yesterday? Reduce interest rate further or what? You have to understand the transmission mechanism.
“If they had left it at that 12 per cent like everybody thought they would, it wouldn’t have made any difference because we have a very poor economic performance.”
The Nigerian Observer that 2016 budget has been implemented to the tune of N2.1 trillion out of N6.06 trillion.
Only N253 billion of the N1.8 trillion budgeted for capital expenditure has been released.
He said that the Ministry of Finance, Ministry of Budget and National Planning and all the key players in the fiscal sector must improve the implementation of the 2016 budget.
He said when this was done, he expected the economy to grow at the end of the third quarter “no matter how small”.
“They need to identify sectors, whether it is solid minerals or agriculture or transport, and attract significant investment.
“Policies that will attract investors to those sectors are what we should start talking about,” he said
Okiti said the raise in the MPR was unlikely to curtail today’s inflationary pressures since the factors driving the current increase in general price levels were largely cost-shocks and not demand related.
“On the bright side, tightening the MPR which will reduce negative real interest rate will come as a good news particularly for foreign portfolio inflows.
“It will also help to stabilise the Naira in the currency markets which is one of the core mandates of the CBN.
”’The downside, I think the move could not only help exacerbate the current difficult operating environment for firms, but would also lead to increased cost of funds for net borrowers, thus dampening corporate investments.”
