Managing Director/Chief Executive Officer of Financial Derivatives Company Limited (FDC), Bismarck Rewane has cautioned that continued monetary tightening by the Central Bank of Nigeria (CBN) could stifle investment, slowdown economic growth, and potentially push the economy toward a recession.
Rewane, who gave this warning during his October 2024 presentation at the Lagos Business School (LBS) Breakfast Session, expressed the need for stronger coordination between Nigeria’s monetary and fiscal policies.
The FDCL CEO pointed out that while monetary tightening is necessary to control inflation, excessive reliance on it without complementary fiscal measures could lead to unintended economic consequences.
According to him, “sustained monetary tightening can slow down economic growth as higher borrowing costs discourage investment and consumption,” adding that there is need for a “handshake between monetary and fiscal policies.” He noted that “without this balance” the country could slip into a recession.
Rewane highlighted that while the Central Bank of Nigeria focuses on curbing inflation through higher interest rates and liquidity control measures like increased cash reserve requirements and open market operations, fiscal policies must address structural challenges.
These include food supply chain insecurity and the need for investment in critical infrastructure and social programs to boost productivity.
On the recently announced N70,000 minimum wage, Rewane described it as a “money illusion” in an inflationary environment.
With inflation at 32.15 per cent, the real value of the minimum wage is closer to N53,000, offering little actual improvement in workers’ purchasing power.
He said, “Real wages may not significantly improve due to rising prices,” stressing that inflation continues to erode workers’ financial well-being.
Rewane also warned of the economic impact of an anticipated increase in petrol prices, which he said would trigger heightened inflationary pressures, reduce consumer disposable income, and disrupt supply chains. While “SMEs will be hit the hardest.”
He, however, projected renewed pressure on the Naira as foreign exchange demand increases during the festive season, driven by high import demand and speculative activities, creating further challenges for economic stability.
