Monetary policy realignment required to meet challenges of digital ecosystem – Emefiele

Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, has emphasised  need for monetary policy realignments to take account of the shifting dynamics of the digital ecosystem

 Emefiele, who spoke at the opening of the 2022 retreat of the Monetary Policy Committee (MPC) on Friday in Lagos, noted that there was a need to rethink financial system regulation, supervision and monetary policy in light of digital financial innovation which come with both benefits and associated risks.

Pointing out that Nigeria had witnessed very difficult times, from the global financial crisis, to Ebola, to oil price war, to cryptocurrencies, to COVID-19 pandemic to Russia-Ukraine war, and to rising global inflation, with all the severe consequences for macroeconomic stability and growth, Emefiele said the CBN had adopted bespoke policies to weather the storm.

However, he said that “monetary policy has been severely challenged, as its policy space narrowed significantly, in some cases, paradoxically and necessitating the need to rethink monetary policy in the context of emerging challenges and economic transformation.”

The apex bank boss noted that the evolution of FinTechs, Cryptocurrencies, Digital Payments, Artificial Intelligence and Machine Learning, have changed the functioning of the financial and banking sectors, both globally and domestically, underlining the urgent call for the need to rethink financial system regulation, supervision and monetary policy implementation.

“While the innovations come with lot of risks and uncertainties for the sectors, they also have many benefits for positive economic transformation and particularly, financial inclusion which has been the principal catalyst for inclusive growth, poverty reduction and employment generation,” he added.

He said that the Central Bank of Nigeria has championed the financial inclusion principle to achieve the SDGs, including the recent launch of the eNaira (CBDC) to capture the large unbanked populace into the formal sectors and also improve monetary policy efficiency and positive impact on the better standard of living for the population.

Emefiele urged members of the MPC to share their experiences and thoughts on these emerging issues with the objective of “collating some well thought-out and implementable measures to address the impacts of digitilisation on the Nigeria economy.”

He said that while post-COVID growth recovery in Nigeria can be adjudged to be moderate and stable, “we have seen a major change in the key sectoral drivers of that stable growth phenomenon, including the services sector, modernised agriculture, and manufacturing, suggesting that technology and innovation is playing a major role in output growth and economic development in Nigeria.”

This, he added, highlighted “the  need to explore new ways of adapting monetary policy tools to improving the contribution of technology and innovations to the growth equation.”

He also stressed the importance of MPC members, taking into account the need for regulators to remain relevant in the emerging digital ecosystem, to embrace themselves with advanced level understanding of the interplay of digitalisation with monetary policy objectives, targets and tools.