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Foremost Economist Condemns Central Bank’s Monetary Policies

By on January 15, 2013

Foremost Nigerian economist, Mr. Henry Boyo has condemned the Central Bank of Nigeria for implementing faulty monetary policies that are holding the Nigerian economy to ransom.

The renowned economist who is a staunch critic of the CBN made the remarks at the ‘Nigeria Fiscal and Monetary Crisis: The Way Out,’ which was organized by the Save Nigeria Group in order to mark the one-year anniversary of the Occupy Nigeria movement.

Boyo said, “I’ve never seen a country where the Central Bank sells Dollars to Bureau de Change,” said Mr. Boyo.

“We even pride ourselves with giving agricultural loans at the rate of seven per cent, whereas in serious economies, it is as low as zero per cent.”

He cited astronomical interest rates, a steadily depreciating Naira, high rate of inflation, and out-of-control of smuggling as some of the factors destabilizing the economy.

“You can’t grow as a country when your Central Bank is borrowing at 12 per cent. The CBN borrowing money they don’t need,” said Mr. Boyo.

“How can you be using N2 trillion, over 40 per cent of budget, to pay subsidy? Inflation at over 12 per cent, there’s no way the economy can grow,” he added.

“How will anyone in their right senses say that they are mopping up money, and they tell you that the money will be warehoused, and they are paying 12 per cent,” Mr. Boyo asked.

“We are not managing excess liquidity properly; it is the creation of the Central Bank.

“They (the CBN) will tell you that it is the result of expansionary fiscal policy. They will confuse you. It doesn’t exist.

“It is not government that will grow the economy, it is the real sector. And they cannot do it with the CBN current policy framework.

“High interest rates destroy production because it increases production costs. So don’t be surprised when your warehouses are converted to churches and mosques.”

In their response, the CBN’s Director of Research said Mr. Boyo’s economic best-case scenario of lower interest rates, low inflation and a strong Naira were an “impossible trinity”.

He said it was impossible to have all three economic metrics moving in the same direction at the same time. He also queried Mr. Boyo’s statement on single digit interest rates.

He said, “When you are making comparisons, it is always good to get your facts right. There is no developing country, save a few, that you have the interest rate regime that he is talking about?

“Has he checked Brazil? Brazil is the fifth largest economy in the world. Has he bothered to look at Ghana? I challenge him to go to the Ghanaian website and see the interest rate.”