The Monetary Policy Committee of the Central Bank of Nigeria released its communique on Tuesday 20th of September at the Head Office of the CBN in  Abuja.

In one of the most detailed communiqués under the current CBN governor, Godwin Emefiele, the committee recognised that economic conditions have so far not been sensitive to monetary policy interventions and called urgent complementary fiscal policies to resuscitate production and engineer aggregate consumption. While the imperative for ensuring financial system stability remains, the MPC reiterated the fact that monetary policy alone cannot move the economy out of recession.

The CBN went on to outline urgent steps that the Buhari led Federal Government needs to make to complement some of its monetary policies. The steps include:

Diversification of the economy away from oil

“In particular, members underscored the imperatives of diversification of the economy away from oil into agriculture, manufacturing, and services.”

The government has already begun to make strides in these non-oil sectors as shown in the Q2 growth rates for agriculture and manufacturing.

Payment of Salaries

“As well as more efforts towards payment of salaries and arrears of public sector employees particularly in states and local governments to stimulate aggregate consumption, as part of the overall fiscal policy menu kit.”

Increase Capital Expenditure

“On the supply side, efforts must be intensified at increased capital expenditure to redress infrastructural deficits, improve the business environment and spur growth.”

Cut Taxes

Consider tax incentives as a stimulus on both supply and demand sides of economic activities. The government has embarked on some capital projects to provide an economic stimulus but are yet to provide notable tax breaks to individuals and businesses. Anambra State is the only state to have cut taxes to inject an economic stimulus.

The MPC, however, noted that stagflation is indeed a difficult economic condition with no quick fixes, especially as it was imposed by supply shocks as well as fiscal and current account deficits. Consequently, they purport that the policy framework must be revamped urgently to provide an enabling environment for reversing the negative growth trend. While the imperative for ensuring financial system stability remains, the MPC reiterated the fact that monetary policy alone cannot move the economy out of stagflation.

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