CFG Advisory CEO Adetilewa Adebajo has commended the Central Bank of Nigeria’s decision to hold the monetary policy rate, calling it a necessary step for economic clarity.
In an interview with Arise News on Friday, he discussed forex stability, inflation trends, and the need for stronger policy coordination to address Nigeria’s fiscal challenges.
Adebajo weighed in on Nigeria’s monetary policy stance, forex stability, and broader economic concerns, emphasising the importance of policy coordination and transparency.
Adebajo described the Central Bank of Nigeria’s (CBN) decision to hold the monetary policy rate (MPR) as a “welcome development.” He explained that the move allows time for a clearer economic outlook.
“I think the holding of the rate is a welcome development. The reason why is, I think it’s important that the central bank takes a look at the view because there are leading and lagging indicators in the economy, and inflation is a lagging indicator. If we look at it in the next three months, it would give time to give a clearer dimension on the economy,” he stated.
On the financial market, Adebajo noted that real interest rates in Nigeria are now positive, meaning that interest rates are higher than inflation. “On the other side, on face value, what is important now is the fact that real rates are positive in Nigeria as a question of fact—that interest rates are higher than inflation—and so we have value with finance assets within the financial market,” he added.
Addressing the question of when a potential decline in the interest rate could be expected, Adebajo emphasised that monetary policy is dictated by economic conditions.
“Monetary policy is determined by the situation in the economy. In order for us to be able to stimulate growth, we have to go through a period of tightening, and once we are comfortable, then we are fine,” he explained.
He also pointed to foreign exchange stability and fuel price adjustments as major factors affecting inflation.
“There is stability now in foreign exchange markets, and the fuel prices are finally being determined, which are the two key cost-push factors that have been driving inflation. Now that we have stability and understanding of those rates, I think it’s clear that in the next two months, the trajectory on inflation is downwards,” he asserted.
While acknowledging progress in monetary policy, Adebajo raised concerns about government expenditure and debt levels.
“The key problem we are facing is government expenditure. If you take a look at the budget that has just been passed, there is a cumulative deficit of close to N40 trillion, and debt service is about N16 trillion. We have hit a ceiling of debt of N150 trillion. This is clearly unsustainable,” he warned.
He further stressed the need for policy coordination over macroeconomic adjustments.
“What is important now is macroeconomics, but I believe it is not as important anymore. What is important now are policies and the coordination,” he said.
Adebajo also highlighted improvements in transparency within Nigeria’s forex system, citing the Bloomberg terminal and the FX Code as key developments.
“We now have transparency in the FX system—the Bloomberg terminal and the FX Code. The FX Code was signed by the Chairman of the banks, the managing directors, and the Central Bank. I believe what the Central Bank needs to do is not to be afraid to sanction banks, bureau de change, and anybody that messes around. If we do that, the continued stability we see in the foreign exchange system will be sustained,” he stated.
According to Adebajo, this transparency and accountability, as outlined in the FX Code, will help foster economic confidence.
Finally, he expressed optimism about Nigeria’s economic trajectory, predicting a potential rebound in the latter part of the year.
“We have seen great shoots in the economy; records are coming up. If we continue along these trends and nurture the economy properly, I think we might begin to see a rebound by the end of the third or fourth quarter of this year,” he concluded.
