Q & A Session:
Q: What would you say was the major trigger of the inflationary pressure in the US and major developed countries?
A: Three things: Fiscal stimulus of 2020-2021; Accommodative monetary policy of 2020-2021; Rising energy prices triggered by the Ukraine war.
Q:- As geopolitical tensions between Russia and Ukraine continue, do you foresee a continued decline in Crude Oil prices in the medium term?
A:- No. A strengthening Chinese economy (reversal of zero-Covid policy and revived real estate sector), the likelihood of the US economy escaping recession, and a high probability of recovery in the EMDEs.
Q:- Nigeria has always been a monocultural economy. Is it possible to diversify our dependence on Crude Oil? What has been the major impediment to achieving this? And what areas would you propose we focus our diversification prospects on?
A:- Correct the reference to monocultural – separate between diversified economy and oil dominated external sector. It is in the data. Export-led growth, focusing on the dominant and top-growing sectors.
Q:- While speaking on Exchange Rates, you mentioned structural deficiencies. Please can you shed more light on these structural deficiencies and what is your proposed solution to these?
A:- Why do we depend so much on imports? Why do we consume what we don’t produce and produce what we don’t consume? How can we change that? Focus on whatever will make domestic manufacturing thrive. Alignment of internally consistent policies (fiscal, monetary, commercial, and investment). Production-focused infrastructure investments. Export-specific incentives. Government-led preference for locally produced commodities.
Q:- The Monetary Policy Committee (MPC) just announced another increase in Monetary Policy Rate to 18% but the Inflation Rate still keeps rising. How do you interpret this situation as the continuous increase in MPR not having an impact on the Inflation Rate?
A:- It is an aberration. Rising interest rates is a burden to financial institutions, especially credit grantors. It is also a factor in the cost of doing business, especially in the formal sector which accounts for 60% of Nigeria’s GDP. Moreover, the Nigerian economy is in desperate need for growth and that weighs more on the side of tapering the MPR.
Q:- You mentioned the gradual removal of subsidies. Please what is your take on Fuel Subsidy removal? Why a gradual removal over a total removal?
A:- Total removal will cause inflation spike and chaotic socio-economic implications. Inflation is already high, with implied high cost of living, poor standard of living and struggling large population at the bottom-of-the-pyramid. Subsidy removal should be aligned with domestic crude refining to such level (as envisaged) of 90% of domestic consumption of refined petroleum products by the Dangote refinery and two other modular refineries in Delta and Edo States.
Q:- Please what is your perspective about Nigeria being greylisted and the AML/CFT implications on financial institution and how they can improve their readiness?
A:- Compliance with the Money Laundering (Prevention and Prohibition) Act 2022, including training in AML/CFT/CFP for Directors and Senior Management. Also, keep in-step with the CBN’s April 2018 AML/CFT Administrative Guidelines.
Q:- What factors affects inflation rate, given that there is no correlation between the interest rate and inflation rate?
A:- There is a correlation between interest and inflation but not strong, even when you lag inflation. Factors that affect (or cause changes in) the inflation rate include demand/supply of loanable funds, monetary policy, governments’ fiscal operations, state of the economy, state of the banking industry, imported inflation, state of domestic manufacturing, and capital flows.
Q:- What do you consider to be the biggest challenge to Nigeria’s ease of doing business and what is required to tackle it?
A:- Misalignment of policies (fiscal, monetary, commercial and investment); poor policy sequencing; poor implementation of policies, programmes and projects, etc. Focus on improving the ten core factors in Ease of Doing Business (getting credit, protecting minority interests, dealing with construction permits, enforcing contracts, starting a business, resolving insolvency, paying taxes, getting electricity, trading across borders and registering property).
Q:- What do you think on using technology integration into our agriculture and educating our sme on mechanized farming for food sustainability? How can you advise the incoming government on derivatives of our farmers?
A:- Deepen what the German, USA and Canadian governments are doing in Nigeria in these areas, building and strengthening capacity in large agric enterprises and smallholder farmers.
Q:- How do you see the Real Estate sector performing this year?
A:- In a presentation that I made in February 2023 on the real estate sector and the Nigerian economy, finding a strong correlation of 0.793487 between the Nigerian GDP growth rates and real estate growth rates during Q1’2016 to Q3’2022. Growing economy, growing population, rapid urbanization and prospect of expanding midlle class point to opportunities.
Q:- What in your opinion is the true, the whole truth, regarding the actual daily consumption rate of PMS in Nigeria? There seem to be a lot of blind spots concerning the production and consumption rate of PMS in Nigeria.
A:- I cant give you a true view because I’m an outsider to what goes on in the oil industry; only an analyst’s perspective. Latest media reports put it at 80 million litres daily, which should be placed against the number of vehicles on our roads (11.46m, of which 53.8% are commercial, 44.5% private, 1.6% government and 0.1% diplomatic) and the volume we consume in running petrol engine generators. Add to that the quantity smuggled out of Nigeria and the picture is complete.
Q:- What sectors should investors be looking to invest in taking into consideration a new dispensation?
A:- Opportunities exist in every sector of the Nigerian economy, given our taste and high propensity to consume! Give attention to the top-10 contributors to our GDP and the top-6 fastest growing sectors during 2016-2022 and post-Covid 2021-2022.