For the first time, the Federal Government last week, admitted that the nation?s economic challenges cannot be reversed with monetary policy, without corresponding fiscal support.
Besides, the expected policy boost needed to engender desired level of growth needed to take ?our people out of poverty? will remain short with the fiscal policy lag.
President Muhammadu Buhari made the observations at the 2016 Governors Symposium and the 39th Ordinary Session of the Assembly of Governors of the Association of African Central Banks (AACB), in Abuja, with the theme ?Unwinding Unconventional Monetary Policies: Implications for Monetary Policy and Financial Stability in Africa?.
Meanwhile, Nigeria and other commodity dependent economies have lost more than $40 billion to capital flight due to uncertainties, especially as the ongoing rout in the prices of commodities, particularly the crude oil, heightened.
The nation?s capital market lost a host of foreign investors, who pulled out their stakes in flight for safety as they lost confidence in foreign exchange flows with the dwindling prices of the country?s major revenue earner- crude oil.
Nigeria has been hit hard since the slump in oil revenues, which distorted public finances and aggravated fiscal non-performance, while raising the pressure on the Naira as demand for scarce foreign exchange mounts. Already, the implications are telling now, pushing the economy towards recession zone.
Yesterday, the naira touched an all-time low of N365.25 per dollar, while the parallel market rate remained high N394/$ per dollar.
CBN Governor, Godwin Emefiele, said: ?Last year over $40 billion moved out of emerging markets. That is why you see most African countries suffering from exchange rates pressure.?
But Buhari admitted that CBN had applied quantitative easing measures through specific intervention programmes targeted at simultaneously addressing the shortage of liquidity in the banking system and providing credit to the real sector.
Buhari, who reiterated that monetary policy must be complemented with fiscal and other policy measures, however noted that strong coordination between monetary and fiscal authorities is extremely important.
According to him, the region is confronted with several global and domestic economic challenges and most worrisome is the slowdown in growth; weakening global aggregate demand; rising inflation; capital flow reversals as a result of tapering in the United States; rising debt levels; increased exchange rate volatility and depleting of external reserves due to dependence on primary commodity exports.
?Given the daunting challenges confronting our economies, monetary and fiscal policies should open new frontier on the fastest and most efficient strategies for diversifying our economies.
?For us in Nigeria, while recognising the challenges we are confronted with and the need to surmount them, we are determined to diversify the economy. We are taking measures and implementing policies that would ensure we are self-sufficient, generate massive employment for millions of our youth, and explore our untapped human and natural resources.
?We shall also embark on export and production diversification steps including investment in infrastructure; promotion of manufacturing through agro-based industries and expand regional trade. All these would involve integrating the informal economy into the mainstream and providing funds to small and medium enterprises (SMEs),? he said.
He said that banking system across the continent has an important role to play in the fight against corruption, as most stolen funds have contact with it, since it degraded to a veritable tool for laundering stolen funds.
He raised the hope that the association, with the cooperation of all member-countries could be an important machinery for fighting money laundering and illicit flow of funds, which is one of the cardinal objectives of the association.
?As major regulator of the financial system, I urge you to intensify your surveillance and propose policies that would guide the operations of our financial institutions and reverse the trend of illicit flow of funds out of Africa.?