Emeka Ucheaga Advisory

Dear Speculators, Economic thought is contestable and opinionated but economic fact is definite, you are either right or wrong. For the second consecutive Monetary Policy Committee meeting, we have correctly predicted the outcome of the meeting and correctly called the key interest rate (read up our last post). Still many analysts, including the Nigerian Minister of Finance continue to call for lower rates to salvage the economy from prolonged negative growth. Twice the MPC has ignored them and rightly so. How does the CBN justify low rates in times of high inflation? That's a doltish request! Numerous Keynesian economists have fallen prey to the interest rate fallacy, believing that low interest rates are accommodative monetary policies that lead to economic growth. On the contrary, Friedman proved that interest rate cuts is indeed a tightening monetary policy which leads to a reduction in the monetary base of a nation. Rather than interest rate cuts leading to economic...

Dear Speculators, For the fifth time this year, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria will seat to decide on new monetary policies to influence the general economy to achieve their policy objectives. These objectives can be broken into four macroeconomic goals; economic growth, full employment, price stability, and exchange rate stability. The main policy tool of the MPC is the monetary policy rate (MPR) which is the rate at which the CBN lends money to banks. Now it is almost impossible for the MPC to marry all the objectives by simply using interest rates. This is because while raising rates may favour the last two objectives, it is unfavourable to the first two objectives and vice versa. Understanding what drives each of these objectives is very important. Economic growth is achieved through an increase in productivity in the economy, either through technology or an increase in skilled labour. Even zero rates in America and Europe hasn't ...

Dear Speculators, We can all agree that the Nigerian economy is in a recession. Criticism has been heaped on both the past and incumbent government and lots of opinions on how to resolve the current crisis have poured in from various sources. Here, we describe some of our ideas on creating a working and prosperous economy for Nigeria. We believe it is necessary we repeal all capital control legislation that prevents the free flow of capital in and out of the country. This will boost investor confidence and we expect a greater volume of foreign capital will move into the country than would leave our shores thanks to zero interest rates and negative yields in Europe and America. The FDI could further be amplified by external borrowings as both the private and public sector seek to take advantage of the 'cheap' money available abroad. Capital account surplus will help augment the value of the Naira. A cheaper dollar will reduce cost of importation and reduce the growth ...