Mounting political tension ahead of 2019 depleting foreign reserves—Prof
First indigenous Professor of Capital Market and the Head of Banking & Finance Department at the Nasarawa State University, Keffi, Prof Uche Uwaleke, has traced the observed steady drop in foreign reserves to rising political tension ahead of the 2019 general elections.
In an interview, he stressed that going forward, “Further impacts will depend on how the entire process is handled”.
“If you have been following the commentaries on why the stock market has been on a downward trend, especially since the beginning of the second quarter of this year, they all boil down to increasing political tension.
“The fast pace of foreign reserves depletion I spoke about earlier also has a lot to do with it. According to Uwaleke, “There seems to be a consensus of opinion that the increasing political tension, more than any other factor, is to blame for the bearish stock market trend. This is despite the favourable crude oil price and relatively good corporate results”.
“So a great deal of effort must be made by all stakeholders to reduce the political risk, which is making both foreign and domestic investors shy away from the market. Judging from our recent history, government spending usually goes up in an election year, which tends to fuel inflation rather than spur growth, suggesting that the extra public expenditure ahead of polls is largely wasteful. This narrative has to change.
“If the public is clamouring for low interest rate regime that lowers cost of doing business and boosts credit to the private sector, then unproductive spending that aggravates inflationary pressure must be avoided else the CBN is constrained to tighten monetary policy. The government must not allow the economy take the back seat in the coming months.
The capital market expert noted that “Nigerians and indeed the international community require constant assurances that the economic policies of this administration, especially in relation to infrastructure development, job creation and poverty alleviation would remain on track and not sacrificed on the altar of politics”.
