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The Centre for the Promotion of Private Enterprise (CPPE) has raised concerns about the unintended consequences of Nigeria’s ongoing monetary policy reforms on the real sector. Dr. Muda Yusuf, the organization’s Chief Executive Officer, noted that these reforms by the Central Bank of Nigeria (CBN) are inadvertently making investments in financial instruments more attractive than those in the productive economy.
Speaking at the 2024 Treasury360 Conference & Exhibition, organized by the Association of Corporate Treasurers of Nigeria (ACTN) in Lagos, Dr. Yusuf shared insights on the implications of monetary policy shifts under the theme, “Monetary Policy Orthodoxy: Implications for Private Sector and Corporate Treasury.”
Challenges for the Real Sector
Dr. Yusuf highlighted that while reforms are necessary, the current trajectory is fostering a banking system increasingly disconnected from economic development.
“Due to the rising cost of funds, it is now more profitable to invest in risk-free financial instruments than in the real sector,” Yusuf stated. “This creates a situation where the real sector, a critical driver of economic growth, is penalized in favor of financial investments.”
He cautioned against rigid adherence to either orthodox or unorthodox monetary policy models, urging authorities to adopt a pragmatic approach that prioritizes economic inclusion and addresses market failures in Nigeria’s developing economy.
Opportunities Amid Challenges
Despite these challenges, Dr. Yusuf pointed to several opportunities emerging from the reforms.
“There is immense potential for import substitution across sectors such as education, healthcare, tourism, industrial raw materials, and local food production. The depreciation of the naira also enhances opportunities for export businesses and diaspora investments in Nigeria,” he remarked.
Yusuf highlighted that the weakened naira, which currently sees $1 trading for approximately ₦1.7 billion, presents unique prospects for export-oriented ventures and service exports.
Insights from Treasury Experts
In his opening remarks, ACTN President Adeyinka Ogunnubi emphasized the conference’s relevance to Nigeria’s evolving economic landscape.
“The theme, ‘Policy Implications & Building Sustainable Treasury Strategies: Nigerian Perspectives on Tackling Inflation and Interest Rate Uncertainty,’ reflects the pressing challenges and opportunities in the nation’s economy,” Ogunnubi said.
He added that the event aimed to provide actionable insights for aligning treasury operations with Nigeria’s broader economic and environmental goals, demonstrating that profitability and sustainability can coexist.
Way Forward
Dr. Yusuf underscored the need for state intervention to address market inefficiencies and promote inclusive growth, ensuring that reforms do not leave vulnerable populations behind.
“Economic policies must continuously evolve based on what works and what doesn’t, with a focus on fostering growth and stability in both the financial and real sectors,” he concluded.
The 2024 Treasury360 Conference served as a platform for dialogue among stakeholders, offering strategies to navigate inflation, interest rate volatility, and other pressing economic issues in Nigeria.
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