I  begin this discussion with an explanation of the term ‘macroeconomic stability’. First,  macroeconomic deals with the aggregates unlike microeconomics that is concerned with the individuals, the households and the firms. The macroeconomic indicators are inflation rate, unemployment rate, interest rate, investment ratio, manufacturing capacity utilization rate, exchange rate, external reserves, etc. Consequently, macroeconomic stability is maintaining consistence in these indicators.
Contributing to the debate, Adesina-Uthman Ganiyat Adejoke, an Economist and Head of Economics Unit of National Open University of Nigeria (NOUN) described macroeconomic stability as a set of economic policies aimed at minimizing economic vulnerability to external shock and also act as  a buffer when such shock occurs. Adesina-Uthman who has presented many research papers both within and outside Nigeria quoted the European Union’s Maastricht Criteria which refers to macroeconomic criteria required of all member nations as currency stability (2.5%), low and stable interest rates (caped at 9%),  low and stable inflation (capped at 3%), low national debt to GDP (capped debt at 60% of GDP) and low deficit (capped at 3% of GDP).
A thoroughbred reasearcher, Dr. Adesina-Uthman was of the opinion that there is the need for a supply-side performance to ensure stable currency, stable and low inflation to maintain price competitiveness, policy on non-volatile short and long-term interest rates and low nation debt and deficit to encourage growth. She strongly believed that these policies may drive spending and link the real economy to financial economy for sustainable growth. She concluded that policies on macroeconomic stability need a good review to reduce Nigeria’s  economic vulnerability and reduces external shock which are sometimes inevitable.
Another contributor to this debate was Alh.(Dr.) Mohammed Jibrin Ahmed, the Chairman/CEO of Shelter Construction Company Ltd. An award-winning technocrat and businessman, Mohammed was of the opinion that the Nigerian economy is likely to sustain its growth momentum and maintain sound macroeconomic fundamentals this year. He, however, cautioned that the expected inflaååååtionary and foreign exchange pressures would require actions by the monetary authorities to cushion the effects. He believed that economic growth åis expected to remain robust in the remaining part of the year, driven by the services and agricultural sectors. A major stakeholder in President Goodluck Ebele Jonathan’s Transformation Agenda, Alh.(Dr.) Mohammed Jibrin Ahmed, strongly believed in the capacity of the Jonathan’s administration to turn around the economy for good. He, therefore, advised the government to pay all verified domestic debts in order to boost economic activities.
Comparing the EU’s Maastricht Criteria (quoted by Dr. Adesina-Uthman) to selected Nigeria macroeconomic indicators, I realised that the country has not met some of these criteria. For instance, the Nigeria’s inflation rate of 8.30% as at July 2014 was higher than the Maastricht Criteria’s 3 %. In the same vein, Nigeria’s 12 % interest rate (also known as monetary policy rate) during the same period was far above the 2.5% capped by the Maastricht Criteria. Similarly, Nigeria’s currency stability rate is far above that of the Maastricht Criteria’s 2.5%. However, Nigeria has recorded less than 40% of debt to GDP ratio stipulated in fiscal responsility ACT 2007 which was far less than the Maastricht Criteria of 60%. This is very important because countries with high budget deficits (relative to their GDPs) generally have more difficulty raising funds to finance expenditures. Another cheering news is that, Nigeria has recorded low budget deficit of 1.9% of GDP against the Maastricht Criteria’s 3%.
In further reviewing the Nigeria’s  economic activities in the first half of 2014, I observe that the nation’s quarterly crude oil production declined although oil revenue recorded an increase, just as the country witnessed a significant increase in agricultural sector’s share of deposit money banks’ credit and a reduction in food imports. There was also an increase in manufacturing sector’s contribution to the Gross Domestic Product (GDP) and credit to the sector although industrial production index and capacity utilisation have not increased significantly.
In addition, I observed that with sustained increase in demand for Nigeria’s crude oil from diverse sources and improvements in domestic revenue generation, total revenue is expected to increase, although fiscal deficit is also expected to increase as the implementation of the budget continues and pre-election related spending pressure builds up. Although Nigerian monetary authorities have pledged their commitment to checking the inflationary pressure. This might cause, I expect the inflation rate to continue to rise in the coming months but still within a single digit because there are expectation for further increases in the MPR (Monetary Policy Rate) and agriculture bumper harvest.
As for exchange rate and external reserves, I strongly believe they are expected to continue to face pressures in the remaining months for at least three reasons. First, the unabated insurgency in the north which will neccesitate additional purchase of military hardwares to combate it will, no doubt, bring pressures on the exchange rate and external reserves. Second, the US tapering of its asset purchase is expected to continue albeit at a slower rate thereby putting pressure on the exchange rate. Third, it is normal to expect some level of foreign capital flows reversal from risk-averse investors in the wake of a general election. Of course, this is expected to lead to an increase in demand for foreign exchange. Consequently, I wish to add that the monetary authorities might have to draw on foreign exchange reserves to ease the pressure on the naira. A honest expectation from these scenario is that the capital market is not expected to return to its peak until around  the middle of 2015.
For sustained macroeconomic stability, policymakers should step up efforts in certain directions such as the government tackling the electricity power generation, multiple taxation and keeping check on the activities of pipeline vandals, especially in order to achieve the budget benchmark revenue. In addition, the non-oil revenue-generation agencies, including the Nigeria Customs Service (NCS) and the Federal Inland Revenue Service (FIRS) should also sustain efforts made towards improving revenue generation from taxes and duties.
nInabo writes from Lagos.

Sustaining Nigeria’s macroeconomic stability