Aligning fiscal and monetary policies will strengthen the financial system, enhance effective regulation, and ensure financial system stability and economic resilience, the Central Bank of Nigeria (CBN) has said.
Speaking on Thursday in Lagos at the 37th edition of the annual Seminar for Finance Correspondents and Business Editors the Deputy Governor in charge of Corporate Services of the CBN, Ms. Emem Usoro, said financial system stability and economic resilience were achievable, especially as technological innovation and digital finance continue to expand.
Usoro, who was represented by the Acting Director of Corporate Communications Department, Mrs Hakama Sidi-Ali, described as timely the theme of the seminar: “Aligning Monetary and Fiscal Policies Towards Achieving a Robust Financial System.”
She said the seminar has over the years provided opportunity for discussions and recommendations to enhance understanding of ongoing government reforms to achieve positive outcomes for Nigerians.
When the CBN governor, Olayemi Cardoso management assumed office more than two years ago, she said the country’s macroeconomic environment was faced with a number of challenges, including high inflation rate, unstable Naira as a result of scarcity of foreign exchange, low external reserves and oil receipts, while the economy, faced with significant foreign exchange backlogs, resorted to dependence on ways and means financing.
These conditions, the deputy governor of the apex bank pointed out, stressed the financial system and highlighted the urgent need for reforms.
She said the Cardoso-led management at the bank provided a strong and transparent leadership that guided the implementation of well-sequenced and compliance-driven measures, including orthodox monetary policies, strengthened corporate governance, and the ongoing bank recapitalisation programme.
These interventions, which she noted aligned with the Federal Government’s reform agenda, have helped restore stability and improve key macroeconomic indicators in the economy, with inflation declining to 16.05 percent, while the exchange rate has stabilised below ₦1,500 per dollar with minimal volatility.
Also, she said other impacts of the policy actions by the Bnak include increased external reserves in excess of $46 billion and providing over ten months of import cover, while monetary policy adjustments are now supporting lower lending rates as inflation continues to ease.
These achievements, she pointed out, underscore the commitment of the CBN to sustain the good relationship with the media to help communicate the benefits and progress of the ongoing reforms to the public.
“Effective communication strengthens public understanding and supports successful policy outcomes,” she said.
While progress has been made in the implementation of the policies by the Bank, Usoro said more work was required to improve macroeconomic fundamentals and the standard of living for Nigerians through effective partnerships among policymakers, regulators, and the media.
Apart from explaining policies clearly and accurately to citizens, she said with better coordination, the media would help promote transparency, accountability, policy discipline and credibility, leading to improved economic outcomes.
She pledged the Bank’s commitment to continue working with the media to help improve interactions between fiscal and monetary authorities, to ensure better alignment of policies, enhance policy outcomes, and ultimately improve the overall well-being of Nigerians.
A development economist and lead consultant, ECOWAS Commission Prof. Ken Ife, who spoke on the strategic framework and specific policy actions required to align the country’s monetary and fiscal policies towards achieving a robust, shock-resilient, and efficient financial system, said the resort to Ways and Means financing by the CBN was the primary cause of the instability in the financial system it was mandated to control.
He said the government over-reliance on domestic borrowing, which attracts sovereign guarantee, raises market interest rate effectively crowd out the private sector, making the sector unable to access affordable credit for productive investment.
The inability of the private sector to access affordable credits, the President, Institute of Professional Economists and Policy Management, said would force the CBN to embark on domestic finance intervention in the real sector.
He said policy alignment between fiscal and monetary authorities was crucial to remove the conflicting signals in the economy, restore confidence, and ensure that the financial sector was capable of effectively performing its core function of intermediation.
Monetary policy and financial systems stability, he said, requires strengthening regulatory oversights by strictly enforcing capital adequacy ratios to ensure financial institutions could absorb unexpected loses without the intervention of the relevant regulatory agencies.
Other interventions include the ongoing bank capitalisation programme to give the banks a solid capital base; ensuring rigorous non-bank supervision to mitigate emerging systemic risks and closing regulatory loopholes as well as intensifying oversight on cybersecurity resilience and enforcing anti-money laundry and counter-terrorism financing protocols to protect the integrity of digital transactions and the country’s reputation.
Prof. Ife emphasised the need to step up the joint risk-based supervision between the CBN and the Nigerian Deposit Insurance Corporation (NDIC), CBN and the Security and Exchange Commission (SEC) to boost crypto supervision, as well as CBN and AFREXIM Bank pan-African payment and settlement system (PAPSS) supervision.
He said the alignment framework between fiscal and monetary policies moves the Nigerian financial system from a position of chronic vulnerability to one defined by resilience, efficiency, and credibility.
