CBN’s Monetary Policy Stance Not Viable to Attract FDIs

o9 December 2015, Lagos –  The outgoing Group Managing Director of FirstBank Limited, Mr. Olabisi Onasanya has said that the recent monetary policy adjustment by Central Bank of Nigeria is not significant to help reflate the economy and attract foreign direct investments (FDIs) into the country.

Olabisi Onasanya, MD:CEO, First Bank

Mr. Bisi Onasanya, MD/CEO, First Bank

This, he however stressed, was his personal opinion and not that of the bank.

Onasaya, said this on Tuesday at a valedictory lecture organised for him by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos. The FirstBank boss, whose tenure ends on the 31st December, also opined that the naira should be determined by the market forces.

The CBN at its last monetary policy committee meeting cut the monetary policy rate (MPR) to 11 per cent and also reduced the cash reserve requirement to 20 per cent, from 25 per cent.

“The monetary policy rate is neither low enough to cause the fundamental change in production and consumption nor do we have appropriate macro-economic structures for high interest rates to attract and retain huge portfolio investments. As long as interest rates continue to move a little to the right and a little to the left, the fundamental changes desired in restructuring the economy, would continue to be delayed”, the FirstBank boss said.

He added: “On the other hand, if it is foreign investment portfolio we what to attract, interest rates would need to kept consistently high and the free flow of capital has to be maintained and sustained to achieve this. We need to decide which of the two sides we want to choose. That would require considerable adjustment with the value of the naira and the shift to increase the dependence of local input in the industrial sector in order to deal with the fallout of exchange rate.”

Also, speaking on the naira exchange rate, especially at the black  market where the volatility has been strong and also on the debate on naira devaluation, he said: “The CBN stance is clear on this and should be respected and accepted in the light of the full support from the Government.  Indeed, the resounding support for this policy from the highest organs of Government has technically made this subject almost a no-go area in terms of debate. But how far-reaching can this hold?

“The politicisation of the exchange rate of the naira is an unhealthy obsession in Nigeria. It gives politicians an incentive to wage war against reality by doing things that are economically harmful in the name of retaining a strong currency. Nigeria wants to have a high oil prices and spend without saving. It then wants to keep its exchange rates stable even when revenues have collapsed dramatically. It is not possible to have all these things at the same time.”

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