LCCI tasks CBN on economic stimulation strategy

Despite sharing concerns of the Central Bank of Nigeria (CBN) on its monetary policy decisions, the Lagos Chamber of Commerce and Industry (LCCI) has urged the apex bank to implement decisions that would stimulate the economy rather than retaining its tightening stance.

Similarly, the chamber urged the CBN to reconsider its stance on the current demand management model in the foreign exchange market, adding that the current situation has profound collateral consequences for the economy, especially in the opaqueness of the foreign exchange management, even as it increases the vulnerability of the forex market to corrupt practices and distortions in the economy.

In lieu of the apex bank’s current stance, the LCCI called for the publication of the list of beneficiaries of the foreign exchange allocations in the past one month in order to foster assess the effectiveness of the policy, while fostering engagement with stakeholders.

Noting that the therapy of interminable monetary tightening has really not worked, the LCCI posits that the protracted problem of excess liquidity should be addressed in a manner that would not persistently cause disruptions and dislocations in the economy, adding that the focus of the CBN has been on tackling the symptoms, not the cause.

Meanwhile, financial analysts at WSTC have maintained their position of an imminent currency devaluation following an intensified speculative activities and round-tripping in the forex market.

In a statement signed by LCCI’s President, Remi Bello and made available to The Guardian, the LCCI supported the apex bank’s position that the federal government needs to unfold its economic agenda to boost investors’ confidence and reduce uncertainty in the economy.

“We also share the submission of the apex bank that the federal government needs to unfold its economic agenda to boost investor’s confidence and reduce uncertainty in the economy, as monetary policy instruments need to be complemented with fiscal policies to achieve the desired economic outcomes.

“The decision by the CBN to retain the current demand management model in the foreign exchange market reflects an ominous indifference of the CBN to the plight of various stakeholders [including manufacturers] over its foreign exchange management strategy. Submissions by stakeholders in the economy to the CBN to review its list of items not valid for foreign exchange were completely ignored by the MPC. The matter was not even mentioned in the communiqué. The LCCI is gravely disturbed by this disposition.

“We do not agree that the factors driving inflation at this time are transient as suggested by the MPC. The continued depreciation of the currency and the structural issues are major factors putting pressures on prices and these are not transient. They need to be tackled urgently.

“The LCCI believes the economy at this time needs to be stimulated, not further constricted. The stock market has been on bearish trend for the past couple of months; output growth in the economy decelerated to 3.9% in the first quarter from 5.9 per cent in the previous quarter; profit margins are on the decline across sectors; purchasing power remains weak as unemployment continues to rise. This is not the time to keep the economy in a tightening mode.

Similarly, financial analysts at WSTC added that the decision of the MPC to maintain status quo in spite of growing inflationary pressures and increasing volatility in the parallel segment of the foreign exchange market underscores the fact that the apex bank is getting to the limits of monetary policy options it can deploy.