Financial Derivatives CEO on how to reform Nigeria's monetary policy framework

The International Monetary Fund (IMF) has released its latest Article IV Review on Nigeria, highlighting the country's economic challenges and the need for policy adjustments. The IMF pointed out that Nigeria's pursuit of multiple objectives, including price and exchange rate stability, credit growth, domestic industrialization, and fiscal financing, has led to a pro-cyclical monetary policy stance. This has resulted in the Central Bank of Nigeria's (CBN) struggle to control inflation expectations. The IMF recommended the reform of the monetary policy operational framework to prioritize price stability. It also mentioned that Nigeria's accommodative monetary policy stance is suitable for the medium term but may need tightening if balance of payments pressures increase. Bismarck Rewane, CEO of Financial Derivatives, shared his insights on these recommendations in an interview with CNBC Africa. He agreed with the IMF's assessment that inflation is a significant issue in Nigeria attributed to government borrowing from the central bank. Rewane suggested gradually removing this practice to increase interest rates and curb inflation. He also highlighted the importance of aligning fiscal and monetary policies for effective economic management. The IMF urged urgent fiscal reforms, emphasizing the need to improve the government's revenue profile and accountability in providing social services. Rewane emphasized the importance of ensuring that increased revenues translate into improved social infrastructure to boost productivity. He noted that Nigeria's external reserves have shown signs of improvement due to higher oil prices, suggesting that the CBN should release more foreign exchange to manufacturers to enhance output and reduce inflation expectations. Moreover, Rewane addressed the issue of rising youth unemployment, stressing the private sector's role in driving job creation. He underscored the need to boost private sector investment and confidence by aligning exchange rate policies to attract domestic and international investors. Encouraging investment in key sectors like trade and construction is vital for job creation in Nigeria's recovering economy. Rewane concluded by highlighting the urgency of addressing the country's high youth unemployment rate, calling it a 'ticking time bomb' that requires immediate action. He echoed the IMF's concerns and emphasized the need for clear and stable exchange rate policies to restore confidence and stimulate job growth. Overall, Rewane emphasized the importance of coordinated policy reforms and effective implementation to address Nigeria's economic challenges and drive sustainable growth.