FORTY-EIGHT-YEAR-OLD Kemi Adeosun was blunt when she appeared before the Senate for ministerial screening. She told the Senate that naira devaluation, as being canvassed in some quarters, will on its own, not solve the nation’s economic problems.
She aligned with the position of the Central Bank of Nigeria (CBN) on Foreign Exchange (forex) restrictions on some goods, classified as finished products.
But not many people bought her position. Those from the international community are unhappy with her stand on forex restrictions.
Chief economist for Africa at Standard Chartered Plc, Razia Khan said: “For many investors in Nigeria, the key consideration is what is done in terms of forex policy. Adeosun’s seeming endorsement of current forex policy during her senate testimony will disappoint investors who had been hoping for more rapid liberalisation of Nigeria’s forex market,” Khan said.
As domestic investors groans, foreigners’ confidence wane as currency restrictions imposed by the CBN to stabilise the naira caused liquidity to dry up. President Muhammadu Buhari has thrown his weight behind the apex bank’s controls, which prompted JPMorgan’s exit, though they (policies) hinder importers and growth in a developing economy expanding at its slowest pace.
The Director-General, Debt Management Office (DMO), Dr. Abraham Nwankwo, disagreed that Nigeria’s delisting from the Global Bond Index by JP Morgan will harm the economy. He said there was no cause for alarm and that the economy has remained attractive to investors despite the JP Morgan action.
Dr. Nwankwo called for the democratisation of public debt management system adding that Nigeria’s debt to Gross Domestic Product (GDP) ratio is still low. Both domestic and external debts stand at N12.11 trillion.
He said should Nigeria needs money from both local and international investors, it will get it. He said all financial instruments issued since JP Morgan delisted the country have been oversubscribed.
According to him, JP Morgan reacted to the collapse of oil prices, which he noted, was an external factor.
He said: “It is not reacting to any deficiency in the bond market itself. So, the bond market remains strong, effective.”
He noted that the country would work diligently to ensure that in the next four years, it takes advantage of the shock caused by the collapse of oil prices to diversify the economy and set itself on a path of sustainable growth.
But, the London-based Head of Africa strategy at Standard Chartered Plc, Samir Gadio, said the rally in Nigeria’s debt was driven “almost exclusively by onshore players”, including pension funds and banks. He said foreign holdings of naira-denominated government bonds have dropped to below 10 per cent from 27 per cent in 2013.
It is also believed that foreign investors may not consider staging a come back to the market until the central bank frees up forex trading by allowing the naira to find a more market-determined level. “What keeps us away is that the yield on government bonds is too low to compensate for the potential devaluation risk”, Lutz Roehmeyer, foreign analyst, who oversees more than $1 billion in emerging-market debt at Landesbank Berlin Investment GmbH, said.
The finance minister has indicated that raising revenue from the non-oil sector would be a priority in her new role. Rewane said the minister’s position was understandable, given the sharp drop in oil revenue. He pointed out the Nigeria was getting only about four per cent of GDP in non-oil revenue, compared to eight to 10 per cent being earned in Angola and neighbouring Chad.
“This is due, among other things to Nigeria, having one of the lowest Value Added Tax (VAT) rates in the world – at five per cent – and a large number of exemptions from corporate income tax. Raising these levies will be necessary to reduce the government’s dependence on oil revenue. However, it will also run counter to efforts to stimulate growth outside of the hydrocarbon sector,” he said.
The President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, urged the minister to liberalise the forex market, expressing belief that her experience and professionalism will benefit the economy.
Gwadabe said: “Forex policies have to get to the grassroots. The government needs to empower the Bureaux De Change operators because they are in charge of large volume of forex transactions in this country. Running them out of business will not benefit anyone.”
Describing the industry as highly regulated, Gwadabe said the empowerment will entail less regulation and encouragement by increasing fees or transaction margins. “She needs to work with the CBN to defend the BDCs’ business in the interest of the economy,” he said.
The Managing Director, Financial Nigeria International, Jide Akintunde, said the only right step taken by the President was to tinker with the ministries, especially with the reduction in the number of ministries as against what obtained under the last administration. The measure would save cost.
Akintunde, however, said that by removing budgeting from the functions of the finance ministry, President Buhari has significantly rid the ministry of its policy-making status. “The function of budgeting was transferred to the enlarged Ministry of Budget and National Planning. With the finance ministry left with just about treasury functions, who superintends fiscal policy?
“A weakened finance ministry is a policy blunder. For five months of no cabinet, it had been difficult to engage Nigeria, and, indeed President Buhari, on economic policy and business talk. To now have a finance minister without policymaking clout would only make it clumsier in engaging Nigeria for business”. He said it is an anomaly to have a finance minister with little fiscal authority.
To Akintunde, the minister of Budget and National Planning, Udoma Udo Udoma, cuts the image of a “senior” minister. His experience traversed legislation (being a two-term senator), a market regulation (having served as Chairman of Securities and Exchange Commission), and the private sector where he had chaired the boards of two of Nigeria’s biggest quoted companies, apart from running a successful legal practice.
Despite the challenges confronting the economy and country, Mrs. Adeosun told members of the Bankers’ Committee that the future looks bright.
“Never mind, I do believe that Nigeria can overcome its challenges. I am not here to paint a rosy picture, but I also believe we have the resilience and space to do that,” she said.
Source :The Nation
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