Nextnomics CEO reacts to CBN interest rate decision

Nigeria's monetary policy committee recently concluded its final meeting of the year by voting unanimously to retain all monetary policy instruments. The decision was met with a mix of reactions and expectations from analysts and economists within the country. Temitope Oshikoya, CEO of Nextnomics, shared insights on the outcome and the challenges facing the Nigerian economy. Oshikoya emphasized the importance of a balanced approach by the central bank to address issues such as price stability, economic growth, and capital inflows. Reflecting on the central bank's move to liberalize the exchange rate in July, Oshikoya noted that while it initially led to increased capital flows, there has been a recent decline in foreign portfolio investments (FPIs). He highlighted the need for structural reforms in addition to exchange rate adjustments to attract sustainable capital inflows. One of the key discussions centered around the divergence between monetary and fiscal authorities in Nigeria. While fiscal authorities advocate for interest rate cuts to spur economic activity, the central bank cites foreign exchange constraints as a barrier to reducing rates. Oshikoya acknowledged the challenges posed by conflicting objectives and emphasized the importance of aligning fiscal, monetary, trade, and structural policies for long-term growth and stability. He cautioned against over-reliance on the exchange rate as a solution and underscored the role of productivity in determining exchange rate dynamics and foreign reserves. Global uncertainties such as Brexit and the potential impact of the Trump presidency were also highlighted as factors contributing to economic ambiguity. Oshikoya noted the need for coordinated policy responses to navigate the challenges posed by external developments. While the central bank's decision to maintain the status quo was seen as a prudent move in the face of competing priorities, Oshikoya called for a holistic approach that considers a range of policy tools to drive sustainable growth. Looking ahead to 2017, Oshikoya pointed out the complex decision-making landscape facing Nigerian policymakers. The evolving global economic landscape, coupled with domestic imperatives, underscores the need for a nuanced and adaptive policy framework. Ultimately, achieving economic resilience and revitalizing growth will require concerted efforts to address structural bottlenecks, enhance productivity, and foster policy coherence across different sectors. As Nigeria navigates a challenging economic terrain, the role of informed and strategic policymaking will be crucial in shaping the country's economic trajectory.