For Tinubu’s economic policies to achieve desired results

The recent decision of the Central Bank of Nigeria (CBN) to increase the Monetary Policy Rate (MPR) by 150 basis points from 24.75 to 26.25 percent is having some negative effects on various sectors of the economy. The decision was made through the Monetary Policy Committee (MPC) at its May 2024 meeting. Though, understandably, the apex bank is currently caught up in a frenzy in its fight against inflation and thus resorts to making credit costly by raising rates, the negative effects on productivity and economic growth should also be considered. One thing that should be done immediately is for the various players in the implementation of the economic policies of the President Bola Tinubu administration to collectively return to the drawing board and improve on the harmonisation and implementation of the various policies for the desired results to be achieved.
  
The hike in the MPR implies sacrificing economic growth to achieve stability in prices. This has thus had devastating effects on the manufacturing sector. Accordingly, manufacturers are already crying foul that this trend of economic policies has negative implications for the survival of the industrial sector. This position, as clearly articulated by the Manufacturers Association of Nigeria (MAN) through its President, Francis Meshioye, is worthy of serious consideration. The lamentation by MAN indicates that the increase in MPR is creating disruptions in production, reducing investments in the sector as well as creating uncertainty about the future of their business and the economy. The issues raised by MAN, which are considered cogent and legitimate, indicate that this hike in interest rates makes the foreign exchange market more volatile, attracting foreign portfolio investments or “hot money”, which does not confer lasting positive effects on the economy. Another issue raised by MAN that the hike in MPR increases energy prices is also legitimate as this increases cost-push inflation, thus having a countercyclical effect on the very inflation which the CBN is trying to fight. All these, according to MAN, affect the competitiveness of the sector. They also have worrying effects on other sectors. For example, the situation has brought some form of competition between the capital market and the money market.
  
The devastating effect of the hike in the MPR, and by consequence the interest rate in the money market or market for short-term funds, and on the capital market is still reverberating. With the increase, market capitalisation for listed equities in the stock market depreciated by a whopping N173 billion within a week, closing at N55.42 trillion from N55.59 trillion on May 21 2024. This has led to significant shocks in the stock market. The returns in the capital market have taken a significant downturn with massive selloffs and concerns about the stability of the market. These sell offs are significant, especially for liquid stocks like banks and is thus not good for market confidence. The negative effects are heavy on local investors, who have been offloading their portfolio with almost 30 bank stocks depreciating in value. The resultant fall in the market index is also damaging as it dipped by almost 150 points from 98.128 to 07.978 over the period.
  
These issues call for the need to bring about a harmonisation of policies in the economy under the Bola Ahmed Tinubu administration. It appears that policymakers in the various segments of the economy are working independently with little or no collaboration with other arms to enhance macroeconomic stability, which is a necessary condition for addressing the country’s economic challenges.
 
The Coordinating Minister of the Economy, Mr Wale Edun, has his work cut out for him but he is yet to get his acts right. This involves regular interactions with the CBN and the various ministries, departments and agencies of government in incorporating their plans and projections into a master plan that will address the input-output relationships in the management of the economy through developing a social accounting matrix that generates the effects of various policies emanating from various sectors, on the rest of the economy. That is one of the secrets of China where the economy has been multiplying simply because programme coordinating and monitoring are very strongly emphasised and desired outcomes are adequately monitored and followed through.
  
Nigerians are tired of the obvious firefighting by the various players implementing economic policies under this administration. The policymakers need to do better. They must carry out a carefully designed economic plan that will be meticulously implemented. The frequent alternating pattern of naira depreciation and depreciation in a yo-yo fashion indicates that policymakers are yet to get it right.
 
The CBN and the Minister of Finance, who doubles as the Coordinating Minister of the Economy, need to strengthen the harmonisation of their policies. If they have been collaborating, they need to do better because presently, the effects of their collaboration have not been producing the desired positive results for the Nigerian economy. They need to know that most Nigerians are groaning in pain and would require better assurance that their interests are being taken care of by the Tinubu administration.