Emefiele: Monetary Policy Rates Won’t be Perpetually Tightened, We’d Loosen at Some Point


The Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, in this interactive session with journalists at the last IMF-World Bank spring meetings in Washington DC, assures that the monetary authorities would continue to take decisions that support economic growth. Kunle Aderinokun, Obinna Chima, and Funke Olaode bring the excerpts:

Economic Outlook

This is a statutory meeting that holds twice a year and I must say it has been very engaging and extremely fruitful. Like you all must have heard, the global outlook remains very good at this time and there is broad-based growth all over the world with growth in 2017 at 3.8 per cent and projected at about 3.9 per cent in 2019. Sub-Saharan Africa growth in 2017 was 2.8 per cent and for 2018 projected at 3.4 per cent, not too far from the 3.5 per cent projected for Nigeria. In 2017, even though Africa’s growth was 2.8 per cent, Nigeria was about 0.83 per cent, while South Africa was 1.3 per cent in 2017. These are positive results compared to last year. When we came here, we were told that Nigeria, Angola and South Africa dragged Sub-Sahara Africa’s growth numbers into the negative territory. I am delighted at this year’s meeting where the result from Nigeria, though still looks weak, and South Africa, has helped Sub-Sahara Africa’s numbers to begin to turn positive. A lot of work still needs to be done, but I must say we have achieved some positive results in the area of inflation, exchange rate and growth. The growth looks fragile, which is why the monetary and fiscal authorities in Nigeria are determined to see that we are able to grow the numbers aggressively.

 On financial inclusion.

We also held a couple of meetings with some existing and potential investors, international credit ratings agencies. We held meetings with some asset managers and portfolio investors. We also held a meeting with Queen Maxima of The Netherland, where we discussed issues meant to advance mobile money and financial inclusion in Nigeria. The target of achieving 80 per cent financial inclusion in 2020, from about 49 per cent where we are right now, looks very stiff. But we are on course towards achieving these numbers.

 On his absence at the US-Nigeria investment summit.

We are here to attend the statutory meetings of the IMF and World Bank. For me, being the Governor of the CBN, what takes pre-eminence are the meetings in the IMF as well as the meetings at the World Bank. I think it is important for me to say that, when I arrived in Washington, the officials of the embassy spoke with me that there was going to be a US-Nigeria summit and I said will check my schedule because I wasn’t consulted when this summit was being organised. What one would have expected was that they would have checked my schedule and that of the finance minister if they thought that our presence at the summit was very necessary. They could have checked our schedule to see that there was no conflict. The US-Nigeria summit was meant to hold between 2pm and 3pm, whereas the World Bank Development Committee plenary session, which is an assembly of ministers and governors of central banks, was to hold between 2.15 pm and 5pm. There was no way the Minister of Finance and myself could have been at that meeting. But I think it is important to say it is unfair for people to begin to cast aspersion without understanding our schedule. The main reason we are here is because of the statutory meetings of the IMF and World Bank. I felt I should explain this. We are not irresponsible people and we apologise to those investors who gathered at the Nigerian Embassy for the summit. My apologies.

We also held some side meetings with some investors and there will always be lots of opportunities to meet with them. But I want to say this is not the fault of the Minister of Finance and myself.

 On external reserves.

I think it’s a joke for somebody to say that there’s nothing important about the reserves, it’s like saying the focus on inflation or GDP or growth or exchange rate doesn’t mean anything. If we could come to a meeting as important as this and the gathering of finance ministers and governors of central banks all over the world to address issues bordering on inflation, growth, exchange rate and reserves, that should tell you how important it is. It’s an economic variable that should be focused, not just by us, but by everybody. Today, our reserves have risen to about $48 billion, and specifically $47.93 billion, as I speak with you, but it’s not to say it cannot come down. It’s a fluctuating number. You make payments and you receive money. So, if tomorrow you hear that it has dropped from $47.9 billion to $47 billion, then moves to $50 billion, don’t be surprised. I don’t want to raise hopes.

  On savings for the rainy day.

Going back to the issue of continuing to build the reserves, we came to a meeting, where one of the important issues that were discussed was the need to save for the rainy day and we must continue to rebuild reserves. That means that Nigeria’s decision to rebuild its reserves from as low as $23 billion in 2016, to almost $48 billion today was a decision in the right direction. So, we are going to continue to do so. If we had reserves when we were hit by the exogenous shocks, we would not suffer the recession that we suffered. And there is a very strong likelihood that there could also be reversals. The Minister of Finance talked about US Fed normalisation – interest rate would go up. And when interest rate goes up in that environment, what happens is the emerging and frontier markets would lose those monies. So, we need to be able to prepare ourselves in case of reversal, so that when it happens, we should be able to withstand the shocks and not be caught pants down again.

On inflation.

We would love as much as possible to have inflation as low as possible. Last month, inflation was 13.43 per cent. We are hoping that in 2018, we should achieve a very low double-digit inflation level and if we are lucky, high single-digit. And I think with that we should be seen to be moving in the right direction.

On interest rate.

I keep saying the MPC has the primary mandate for monetary and price stability. It is a meeting of 12 eminent persons, who come in, take data, analyse them and they take the decision. At this time, we are still in the mode of tightening. Indeed, even the IMF had reported that our position to tighten is the right one at this time, when we are working very hard to rein in inflation. But I can assure all of us, like I said before, that we will not tighten in perpetuity. At some point, we would begin to loosen, and I believe that financial accommodation period is coming very soon.


On financial inclusion.

For financial inclusion target, we have an 80 per cent target for 2020. It has been slow in the last two years and just about 48 per cent. I know it is an aggressive target to expect that it would hit 80 per cent by 2020. We have been holding meetings with very important stakeholders. Up till last week, we were holding meetings between the CBN and NCC, the deposit money banks and even the mobile money operators, about how we can all work together and collaborate. We are taking a study of some of the models in different jurisdictions and I believe that by the middle of next month, a final framework would be released, under which we can ramp up mobile money and financial inclusion in Nigeria. We are going to come up with a structure that is Nigerian and not just going to copy what they are doing in other jurisdictions. What is good for Nigerians is what we would come up with.

 On currency swap with China.

The agreement has not failed. You must agree with me that transactions of this nature would usually involve very strenuous engagements between the countries and the central banks. I can assure that we are expecting excellent results very soon. I will leave it at that for now and by the time the news comes out, Nigerians would be very happy.

On the Naira.

We would keep printing those notes. We would look at the issues. I do know that new notes are being printed. Our Director of Currency, the banks and market associations are working together to ensure that those currencies are delivered directly into the markets so that people feel what we are doing.