After several months of trial and error, the Central Bank of Nigeria, CBN, is finally on the right track. Exchange rate is stabilising; the gap between official and parallel market rates has been closed. For the first time in years, Nigeria is close to having a relatively stable exchange rate which will make planning possible. But, as Bismarck Rewane has, rightly, pointed out, the CBN has been supporting the Naira without saying so. It is unclear how long the CBN will be able to continue the support – without which the gains made so far might be temporary and the rates start moving up again.
Monetary policy alone, however sound, cannot sustain any economy. Just as sound fiscal policies must complement it for the gains made to be consolidated.
Central to fiscal policy is productivity growth. For the country’s Gross Domestic Product, GDP, to grow, Nigeria needs higher real productivity – not rebasing or other gimmicks which have now taken centre stage.