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Market operators react as Tinubu set for monetary policy housecleaning

Article Summary

  • Market operators view Bola Ahmed Tinubu’s intention to review monetary policy positively, as they believe it will bring positive changes to the economy, including a unified exchange rate and reduced interest rates.
  • They also emphasize the need to address the fuel subsidy and the country’s debt burden.
  • Overall, they support Tinubu’s economic focus and expect improvements in the economy.

Some market operators have said that Tinubu’s position on the need to review current monetary policy will be a welcome development that will quicken positive change in the economy.

The operators stated this in a chat with TheTimes while reacting to Bola Ahmed Tinubu’s inauguration speech as Nigeria’s 16th president.

The new President has said that monetary policy needs thorough housecleaning adding that the Central Bank must work towards a unified exchange rate and reduction of interest rate.

What market operators said

Managing Director, of Crane Securities Limited, Mr Mike Eze, in an exclusive chat with TheTimes said that Tinubu has an idea of how to run a political system.

He noted that the problem Nigerians has with the immediate past administration is that the Buhari regime was more concerned about the politics of governance rather than the economics of governance.

  • “We are going to notice a change in the economy, I think the new government is going to hit the ground running from tomorrow.
  • His intention to review monetary policy showed that he is prepared for governance. The country is going to be better off, and my hope in him has been rejuvenated, I have the feeling that he has come to work for Nigeria. 
  • There is going to be a shake-up in the Central Bank of Nigeria, apart from currency mathematics, the rest of CBN’s work is helping to shape the economy. In the last eight years, the Nigerian economy has suffered greatly, the previous administration promised us N1 to $1 but we saw a different thing when they came in.
  • We are going to notice a positive change very soon, first in interest rate, the high rate of interest rate has been affecting the economy negatively. 
  • If the interest rate is high, it will discourage foreign investors, but if the rate is low, it will attract foreign investors and also impacts positively on our foreign reserve. Those three areas the president highlighted have a cyclical effect on the economy,” he said.

The Executive Vice Chairman of Hicap Securities Limited, Mr David Adonri, said Tinubu’s intention to review the monetary policy was a laudable objective but whether it can be achieved in the immediate is the concern.

Adonri noted that it was a high inflation rate that led to a high-interest rate, adding that for the interest rate to decline, it means macroeconomic policies, actions, and results will be able to rein in inflation which is a tall order.

  • “Unfortunately, they are still dwelling in finance, the speech avoided the huge debt overhang that the economy will grapple with. He did not mention it or give any hint of the plan for managing the huge debt.
  • Without an action plan to address the huge debt burden, it will be difficult to bring down interest rates together with inflation. 
  • The issue about ending the multi-exchange regime is the right step in the right direction,” he said. 

The Managing Director of Arthur Steven Asset Management Limited, Mr Olatunde Amolegbe, told TheTimes that the issue of reviewing monetary policy was long overdue but the past administration did not have the political will to address them.

Amolegbe said that the fuel subsidy is hurting national revenue and also impacting negatively both the interest rate and the exchange rate.

  • “When you are subsidizing, it means you are borrowing heavily and to borrow more, you have to increase the interest rate. The removal of fuel subsidies has an indirect link to interest rates and the forex.
  • On the plus side, if the fuel subsidy is removed, it will improve government revenue and the need to borrow will be significantly reduced which will also impact interest rates positively. That will also have a positive effect on foreign exchange,” he said. 

What you should know

Tinubu in his inaugural address also said that the country’s monetary policy needed thorough housecleaning. He urged the CBN to work toward a unified exchange rate.

  • “This will direct funds away from arbitrage into meaningful investment in the plant, equipment, and jobs that power the real economy. The interest rate needs to be reduced to increase investment and consumer purchasing in ways that sustain the economy.
  • Whatever merits it had in concept, the currency swap was too harshly applied by the CBN given the number of unbanked Nigerians. The policy shall be reviewed. In the meantime, my administration will treat both currencies as legal tender,” he said.

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