Global Courant 2023-05-30 16:59:23
Bola Tinubu was sworn in as Nigeria’s 16th president at a ceremony in the country’s capital, Abuja, yesterday. During his inaugural address, the new president announced a number of policy priorities that will receive attention in the coming weeks. He called security a top priority and pledged to invest more resources in improving overall security.
On the economy, he reiterated the need to increase GDP growth to reduce unemployment, noting plans for budget reforms, overhauling industrial policies, making electricity more accessible and addressing currency liquidity issues, allowing investors and foreign companies to repatriate their dividends. and profits. President Tinubu kept his campaign promise to immediately end the controversial fuel subsidies, announcing that the subsidy will be withdrawn because it “can no longer justify ever-increasing costs in the wake of resource depletion.” Instead, he pledged to “re-channel the money for better investment in public infrastructure, education, healthcare and jobs.”
In line with his Renewed Hope Action Plan, the president called for a review of monetary policy, stating that it needed a “deep cleaning.” He stated that the Central Bank of Nigeria (CBN) should work towards a unified exchange rate while reducing interest rates to increase investment and increase consumer purchasing power. He criticized the CBN for its recent plans to introduce new naira notes and withdraw old notes within a very tight deadline, stating that it was “applied too harshly” even though his government will treat both currencies as legal tender. President Tinubu concluded his brief outline of policy priorities by stating that his foreign policy objective is to ensure peace and stability in West Africa and the African continent (see most recent SSA positions, Nigeria: to the eve of renewed hope’ May 24, 2023 for a discussion on President Tinubu’s policy blueprint).
The announcement that fuel subsidies would be scrapped caused some chaos in major cities, with reports of panic buying leading to long queues at gas stations. Consumers are reportedly concerned that gasoline prices will spike due to the planned elimination of the subsidy (Premium Times).
The Central Bank of Kenya’s MPC left its key rate unchanged at 9.5% yesterday, in line with our expectations. The commission cited an expected moderation in domestic inflationary pressures as the reason for the move. The MPC also noted that the tightening at the March meeting was still feeding into the economy, which, combined with government moves to allow duty-free imports of specific foods, should help inflation fall. While the global outlook remains uncertain, the MPC expects the domestic economy to pick up in 2023. The inflation outlook is improving, but we see upside risks from faster-than-expected currency depreciation, volatile weather conditions, a rebound in commodity prices and proposed tax increases. Overall, however, we expect consumer inflation to continue to moderate in the coming months and return to the central bank’s target of 2.5-7.5% by the third quarter of 2023. Against this backdrop, we expect the MPC to keep policy rates unchanged until 2023, as the risk of further tightening remains (see “Kenya MPC: Policy Rate Remains Flat at 9.5% as Inflation Declines,” 30 May 2023).
