CFG Advisory: Nigeria now faced with stagflation - which is more protracted than a recession

Nigeria is currently grappling with a challenging economic situation as it faces stagflation, which is proving to be more protracted than a typical recession. The country's monetary policy has hit its limit, and experts are now advocating for supply side structural reforms and fiscal discipline to navigate Nigeria out of this economic quagmire. Tilewa Adebajo, CEO of CFG Advisory, and Kayode Akindele, Partner at TIA Capital, recently discussed these pressing issues on CNBC Africa, shedding light on the critical concerns plaguing Nigeria's economy. The interview highlighted the significant challenges Nigeria is facing, with a focus on key issues such as the Central Bank of Nigeria's financing of government budgets, rising debt levels, and security threats impacting foreign direct investment. Adebajo emphasized the impact of Nigeria's security situation on the economy, citing a loss of approximately $250 billion in IGDP over the past few years. He also raised concerns about the use of ways and means financing by the government to plug budget deficits, revealing that the debt management office has identified billions in such financing on the central bank's books. Adebajo stressed the urgency of addressing this financing to mitigate macroeconomic risks and stabilize inflation. Akindele further delved into Nigeria's stagnant economic growth, pointing out that GDP growth has remained below 2.5% since 2016, with population growth outpacing economic expansion. He highlighted the government's various economic recovery plans, including the Economic Recovery and Growth Plan, the Nigeria Economic Sustainability Plan, and the National Poverty Reduction and Growth Strategy, emphasizing the need for effective implementation to drive sustainable growth. The discussion turned to Nigeria's mounting debt burden, with Adebajo expressing alarm at the high percentage of government revenue allocated to debt servicing. He warned that Nigeria is technically insolvent due to unsustainable debt levels and highlighted the need for urgent fiscal reforms to break the borrowing cycle. Akindele added that the Central Bank's intervention schemes, while well-intentioned, have stretched beyond its mandate, impacting monetary policy and inflation. He called for greater fiscal control and revenue collection to align with GDP growth. Adebajo proposed the removal of subsidies, particularly on petrol, as a critical reform to address economic challenges, stressing the importance of political will to make tough decisions and prioritize structural reforms. Akindele echoed the need for efficient implementation of economic policies, citing the importance of coordinated efforts across government agencies to drive growth and development. As Nigeria grapples with stagflation and mounting economic hurdles, experts are calling for decisive actions and bold reforms to steer the country towards sustainable recovery and growth.