The former Deputy-Governor, Central Bank of Nigeria (CBN), Dr ‘Tunde Lemo has said that the Federal government should be commended for the courage in managing the wide gap which provided huge arbitrate opportunities.
He however cautioned that dollar scarcity, oil theft, reserve level, previous actions of
the CBN (too many rules), and outstanding trades commodities, capital control, overdue swaps etc. have dried up liquidity.
Lemo who spoke in Lagos in a paper he delivered at the Lagos Business School also said that the projection towards achieving low interest rate is very good to wish, but difficult to
deliver in a high and rising inflation environment.
“Interest rates are high due to monetary and structural reasons and low interest cannot be delivered until we rein-in inflation and address structural factors,” he said.
The former dep. gov. of CBN said that the tax reform committee should be encouraged to
conclude its work in time but mindful of our constitution, stating that priority should be tax compliance and not increase in tax burden.
He described the fuel subsidy removal as another bold step worthy of commendation, stating that it will not only curb sharp practices but will deliver us from being
Big Brother Nigeria.
The problem, he reasoned is that price of fuel is determined by international price of crude and exchange rate of the dollar., stressing that prices will continue to rise “ad-infinitum” if the two variables continue to rise, the more sensitive being the exchange rate.
The bad news, he said, is that because of the need to avoid social crises, fuel subsidy is back, adding that the need for stable exchange rate of the dollar is delicately tied to the success of this programme.
He advised that policy makers should jettison merging the two rate (Naira is not an
internationally convertible currency). A gap of not more than ₦50 should not worry the CBN. “Clear outstanding commitments including swaps, allow repatriation by the Airlines and other Multinationals, review the negative list and line up credit support (only for the BOP support).
He cautioned that there is bumpy ride ahead but said the government needs courage, and see the need to hire competent people and “all of us should be patriotic enough to support the Government efforts,” he said.