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ECONOMICS 101: SANUSI LAMENTS ABSENCE OF POLICIES TO SALVAGE NIGERIA

 

·          Laments absence of policies to salvage Nigeria
·         Says CBN violating loan limits to FG, puts total loan, overdraft to govt at N4.7trn

Former Governor of the Central Bank of Nigeria (CBN), and Emir of Kano, Mallam Muhammad Sanusi II friday in Abuja criticised the administration of President Muhammadu Buhari for relying on massive fiscal expansion and a faulty foreign exchange policy that discourages investment to get the country out of the current recession.
Sanusi made his position known in his keynote address titled, “A Plan to Restore Confidence, Direction and Growth” at the policy monitoring dialogue on the state of the Nigerian economy organised by the Savannah Centre for Diplomacy, Democracy and Development (SCDDD).......
He noted that over 35 per cent of federal government revenues were used to service debts.

The former CBN governor said it was clear that the present administration had inherited serious problems from its predecessor, but the right policies have not been deployed to correct the past and get the economy out of the woods. 

He also said with the current macroeconomic indices, it may be difficult for the federal government to secure the $30 billion loan it’s currently seeking even if approval was granted by the National Assembly, unless it explored alternative concessionary facilities.

Sanusi said: “I think I need to clear my position about this $30 billion-if we can get it I will be very happy, it’s a good thing to have, in fact, if they can get it at a concessionary debt to reduce the cost of debt service, that’s perfect.
“The point is if you’ve two years and you need to invest massively in power, in infrastructure for economic growth, you have to ask yourself, where am I likely to get the money? And I don’t think they’ll get $30 billion in two years if they cannot get $3 billion in two years.
“So am just showing them and saying if you want to grow this economy, look elsewhere and you’ll get this money much faster and attractive. There’s a lot of capital in the world looking for an opportunity to be deployed. What does the investor need for him to bring in the capital? That’s what we need to be doing.”
He noted that banks and foreign creditors will usually consider risks before lending and government appeared not to have a good balance sheet at the moment.
Furthermore, he said attracting investments was key to exiting the recession and government needed to work closely with the private sector to achieve the objective.
Sanusi said the country’s current approach to managing its economic crisis was severely misguided as fiscal policy is given all the attention while its potential impact is small.

He said Nigeria should gear its policies towards attracting investments and focus on reducing FG’s debt service through greater concessionary borrowing rather than increasing its spending through CBN financing.

According to him, until the country signals a clear change in policy, it will be difficult to restore credibility which is crucial for local and foreign investors.
“Until investment picks up, it will be difficult for Nigeria to return to growth,” he said.

Sanusi advised government to among other things, allow price discovery to occur in the FX market and close the gap between FX policy design and implementation.

He also urged government to attract investments into power, refineries and petrochemicals."

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