CEO of The CFG Advisory, Adetilewa Adebajo, has sounded the alarm on Nigeria’s economic situation, warning of stagflation and emphasising the need to control inflation.
Adebajo in an interview with ARISE NEWS on Wednesday, stressed that inflation must be tackled to achieve economic growth.
“As long as the economy is experiencing runaway inflation, the economy cannot grow, and inflation erodes all our purchasing power.
“One of the biggest problems we have in Nigeria is stagflation, which is a very difficult situation to get out of – high unemployment, high inflation, and no growth,” he said.
He said that the effective economic management is vital, and the Dangote Refinery’s success can actually help reduce inflation in Nigeria by stabilising energy supply and security.
Adebajo continued that controlling inflation is crucial for productivity, warning that unmanaged inflation would hinder productivity.
“I think it is important that we look at it because the economic management in this country today is very critical.
“That is why I feel that this Dangote Refinery issue (rift with regulator) is a distraction because the success of that project can actually help reduce inflation and stabilise supply in energy security,” he said.
He went back in history to cite examples of tackling inflation in Nigeria.
“Let’s look into the data: in 2011 and 2014, Nigeria’s economy grew by over 8.5% due to inflation rates of 9-11% and interest rates of 12-13%.”
The economic expert also emphasised the need to control inflation to promote growth, warning that low interest rates can lead to negative real rates if inflation is not managed.
“Low interest rates can spur growth, but only if accompanied by low inflation rates. Otherwise, high inflation can negate the effects of low interest rates, leading to negative real rates and stagflation, as currently experienced in Nigeria.We need to control inflation so that we can provide a platform for growth,” he said.
Adebajo commended the Central Bank of Nigeria’s efforts to target inflation, projected to reduce to 21-24% by the end of the year and 15% by next year.
“We shouldn’t expect anything until this time next year to moderate inflation. The CBN has targeted inflation, saying they want to take it to 21-24% by the end of the year, and hopefully, by next year, we can see it coming down to 15%.
“It’s a question of time. Let’s look at the flip side – pensioners are not complaining because they’re getting nice returns on their savings, and people who are saving and investing are enjoying the accumulated interest on it,” he said.
However, he expressed concerns about the implementation of policies, citing the example of food intervention programs.
On the fiscal side, Adebajo emphasised the need for structural reforms to support small businesses and address debt levels. “Our debt level, if not carefully managed, is becoming unsustainable,” he warned.
“On the fiscal side, particularly for small businesses, he said, ’They require structural reforms, which the government must handle.
“Our debt level is becoming unsustainable if not carefully managed, although we still have headroom to service the debt and our reserves are intact. However, we must control our spending.
“The key issue is that a lot of money is being wasted on subsidies, which is why we supported subsidy removal, but lacked the political will to resolve issues like the petroleum crisis.
“For 2024, we face a deficit of N9.1 trillion, a revenue shortfall of N3.8 trillion, and a new supplementary budget of N6.3 trillion, totaling N19.3 trillion that needs financing.”
Boluwatife Enome
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