Immediate Past Governor of the Central Bank of Nigeria (CBN) and the Emir of Kano, Muhammadu Sanusi II, has thrown his weight behind the sale of government assets to enable it pull the economy out of recession.
Sanusi, who spoke in Lagos Wednesday supported business mogul, Aliko Dangote and Senate President, Bukola Saraki, who had earlier called on President Muhammadu Buhari to sell the Nigerian Liquified Natural Gas plant (NLNG) to generate funds for critical infrastructure projects.
The Kano Royal father said the option would enable the country finance key projects that will improve the economic status of the country, while it can buy back such assets when the economy bounces back.
The former CBN boss also supported the retention of Monetary Policy Rate, (MPR) at 14 per cent, lamenting that the Naira today is undervalued at over N400 to the dollar.
This was as global and local financial experts hailed the Central Bank of Nigeria’s (CBN)’s decision to leave interest rates unchanged despite advice by Mrs Kemi Adeosun, the Minister of Finance, urging the Monetary Policy Committee (MPC), to lower interest rate to enable government borrow locally to boost the economy.
Speaking on the topic, “Searching for Investor Confidence,” at an annual banking report presentation by Afrinvest in Lagos, Sanusi, said reducing the rate would not lead to increase in credit but higher inflation.
He said: “If you lower the MPR by 100 or 200 points today, it is not going to lead to rapid increase in credit; that will reverse a downtrend in output. You will, however, fuel inflation and reduce yields in fixed income market as the Federal Government is trying to attract foreign exchange.
“I personally feel it is a positive trend. When the fiscal authority and many people said they wanted lower rates, I was concerned the CBN would succumb to pressure and the fact that CBN did not seem to me that it is beginning to reclaim its independence, which to me, is a good thing for this economy.”
He noted that reversing its tightening stance will further fuel inflation and reduce yields at a time when the country is trying to lure foreign investors, adding that the country is in dire need of foreign exchange and portfolio investors.
Sanusi also commended the flexible exchange rate policy of the CBN as well as its tightening stance saying, “some decisions will seem to fly in your face within the first week or two, the naira today is undervalued if you take Purchasing Power Parity (PPP), the stocks are grossly undervalued, the fixed income is offering high yields.
Commenting on the actions of the apex bank yesterday, an Economist at Exotix Partners, a leading investment firm for frontier and illiquid markets based in the United Kingdom, Alan Cameron, commended the CBN’s decision, describing it as one of the regulator’s, “most sensible statement in months (and) one clear about the mandate and policy limitations.”
He added that the MPC statement, “ should be confidence-building, albeit from a rather low level.”
Also reacting, Senior Macroeconomic Specialist at Ecobank International, London, Gaime Nonyame, backed the rates retention by CBN.
She said the CBN can’t reduce interest because of inflation and also cannot afford to increase interest rate because the country is already in recession. This she insisted would not be desirable and encouraging to investors, who are expected to bring in much needed foreign currency, Nigeria needs to get out of recession.
Analysts at Foreign Currency Trading & Investment arm of Diamond Bank Plc., Uyi Ohenhen, lauded the CBN’s action. He said it is a positive development that triggered inflow of funds into the foreign exchange market yesterday.
One of the economists that spoke with Reuters also praised the CBN for shrugging off political pressure.
“CBN’s refusal to bow to government pressure is a notable sign of the institution’s independence,” said John Ashbourne of Capital Economics.