•Says risks caused by reforms need to be expertly managed
Emmanuel Addeh in Abuja
A former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, has briefed a group of 20 global institutional investors, mostly US and Europea asset management firms, valued at over $15 trillion, on the state of Nigeria’s economy.
A statement from the event noted that Moghalu spoke during the International Monetary Fund (IMF) and World Bank Annual Spring Meetings, also attended by the US Federal Reserve Bank of New York, in Washington DC.
Themed: “Nigeria: Reform Prospects and Monetary Policy Outlook”, during the event, Moghalu, who is the current Chief Executive Officer of Sogato Strategies LLC, argued that although the current economic reforms are necessary, the government needs to manage the fallouts better.
He described the reforms as painful but necessary, stressing that they are needed to stabilise the country’s economy as global investors are watching closely.
The CEO of Sogato Strategies LLC, a global strategy, macroeconomic and risk advisory firm headquartered in Washington DC argued that investor sentiment appeared to be shifting from mainly negative to a cautious, wait-and-see mode.
This stance, he said, has been influenced mainly by the policy steps taken by the CBN in recent weeks and months.
“However, Nigeria’s external reserves have remained under pressure. If this trend continues, it will become a risk factor for the sustainability of exchange rate stability.
“Much depends on whether the Government of Nigeria will be able to earn more forex income from increased oil production and exports, as well as an anticipated positive impact of the Dangote Refinery on forex exchange pressures,” he maintained.
According to the statement, inflation trends and monetary policy prospects, as well as the selective removal of subsidies on electricity tariffs, were also reviewed by Moghalu in his presentation.
He projected that inflationary pressures would remain elevated over the next two years despite the best efforts of the CBN, owing to a combination of security challenges and their impact on food supply, and the imminent introduction of a higher minimum wage that has become imperative.
He expressed the view that low levels of electricity generation and distribution remain the Achilles heel of the Nigerian economy and projections of its future growth, as economic productivity will remain suboptimal if a transformation does not take place in the power sector.
The global investors and Moghalu , the release said, then discussed his briefing in a question-and-answer session under Chatham House rules (that is, without attribution of views expressed or questions asked and answered to specific participants).
“The consensus view was that caution still reigned regarding the possibility of an immediate return of large-scale capital inflows into Nigeria at the present time,” it added.
As Nigeria continues its difficult journey towards economic stability, Moghalu pointed out that the road ahead will be rocky, with inflation remaining high and public resistance to change persistent.
“If they can maintain this course, the country’s long-term prospects remain bright. But Nigeria’s leaders must be prepared for a protracted battle against entrenched interests and the inevitable backlash against short-term hardship. The world is watching, and the stakes could not be higher,” he explained.
The event also focused on the “subsidy trinity” of fuel, currency, and electricity subsidies that have been the cornerstone of Nigeria’s reform agenda.
“Nigeria’s reforms are a classic example of the short-term pain required for long-term gain. The government’s political will to tackle entrenched subsidies is commendable, but the reforms could have been introduced more expertly.
“The inflationary backlash and public dissatisfaction are real risks that must be managed carefully,” Moghalu explained.
