Federal Government has lament on its poor revenue performance between January and April 2024 by 56.13 per cent when matched against the government’s projections, a member of the Central Bank of Nigeria Monetary Policy Committee, Dr Aloysius Ordu, has stated.
Ordu also stated that the government’s actual spending was 38.60 per cent below budget.
In his statement at the 296th MPC meeting, the MPC member expressed concern over the troubling figures, highlighting the country’s significant development needs. He noted that poverty has risen, with the IMF estimating that over 18 million Nigerians are now food insecure.
The MPC, after the meeting, opted to raise the MPR by 50 basis points to 26.75 per cent from 26.25 per cent.
He lamented that despite urgent measures, inflation climbed to 34.19 per cent in June due to the persistent hikes in food and energy prices, reversing the downward trend observed in the previous three months.
Reacting to challenges impeding the result of its policies, the MPC member said, “During the MPC meeting in July, CBN staff presentations highlighted recent developments on the domestic scene, a few of which are particularly noteworthy. First, as at mid-year, the composite Purchasing Managers Index showed continued contraction, unemployment increased, and real GDP growth remained low in per capita terms.
“Second, inflation rose to 34.19 per cent in June, driven by continuing increases in food and energy prices. On a month-on-month basis, inflation increased to 2.31 per cent in June, marking a reversal of the declining trend recorded in the preceding three months. High food and fuel prices have driven an acute and prolonged cost-of-living crisis in which millions of Nigerians are struggling.
“Third, the Federal Government’s budget data, for the period January to April, showed that revenues underperformed by 56.13 per cent vis-à-vis projections, and actual spending was 38.60 per cent below budget. These are worrisome numbers given the country’s enormous development needs – poverty has increased with over 18 million Nigerians estimated as food insecure by the IMF.
“Unemployment is high, human development indicators are below comparators, and deficiencies abound in the number and quality of infrastructure. Meanwhile, public debt grew from N97.34t in Q4 2023 to N121.67tn in Q1 2024.”
He added that the effectiveness of the monetary policy measures taken so far is significantly constrained by fiscal pressures, which are impeding the ability of monetary policy to function effectively.
He stated, “The balancing act facing the MPC is difficult at the best of times. It is far much more difficult when other policies – structural and fiscal – are not entirely pulling their weights. The monetary policy measures taken thus far are severely hemmed in by fiscal stresses that are making it difficult for monetary policy to do its job. Now more than ever, monetary policy needs much more help from fiscal and structural policies.
“We must minimise the risk that a further hike could backfire, especially at such a time of increased unemployment, rising poverty numbers, and nationwide protests about declining living standards and the exceptionally high cost of governance.”
At the meeting, three members of the Monetary Policy Committee voted to retain the Monetary Policy Rate at 26.25 per cent.
According to a document containing the statements of the MPC members released by the CBN, these three votes contrasted with the majority who voted to raise the MPR by 50 basis points to 26.75 per cent
While the majority opted for a moderate increase to curb inflationary pressures, three members, including Lydia Jafiya, Murtala Sagagi, and Aloysius Ordu, argued that maintaining the MPR at its previous level was more appropriate given the current economic environment.
The MPC, which convenes regularly to assess economic conditions and make critical decisions impacting Nigeria’s monetary policy, faced a divided opinion on the necessity of further tightening measures.
Meanwhile, the Central Bank has incurred an estimated N1.55tn in interest payments for the 12 successful Treasury Bills auctions conducted in the first six months of 2024.
The interest costs in 2024 were approximately 654.7 per cent higher than the N205.63bn recorded in the same period of the previous year.
This is based on an analysis of the amount of T-Bills sold, the interest payments, and the tenor in the period under review.
The auction data indicates a total subscription of N28.15tn, with actual sales amounting to N8.48tn in the first half of the year for tenors ranging from 91-days, 182-days, and 364-day bills and an over-subscription of about 662.9 per cent. In total, the interest payment made by the central bank is N1.55tn, averaging 18 per cent over the life of the securities under consideration.
According to findings, the stop rate, which is the interest rate accepted from the bids on offer, ranged from as low as 2.44 per cent for some 91-day bills to as high as 21.49 per cent for 364-day bills within the period under review.
The high-interest cost is largely due to the central bank’s hawkish monetary policy aimed at curbing the rising inflation rate. The central bank jacked up rates aggressively early in 2024 as part of its policy tools to mop up the money supply from the economy.
