The Federal Government took the right step by instituting forex reforms and freeing forex previously used to defend the naira, Chief Executive Officer, Ministry of Finance Incorporated, Dr. Armstrong Takang has said.
Speaking yesterday at the unveiling of the 2023 Nigerian Banking Sector Report titled: “Getting Nigeria to Work Again!” in Lagos, he said government had in the past, lost so much forex trying to defend the naira.
Defending ongoing reforms in the forex market, Takang, who represented Minster of Finance & Coordinating Minster of the Economy, Wale Edun, said the implementation of the ‘willing buyer, willing seller’ model has preserved forex for the economy.
He said that in its effort to unlock forex liquidity, the Federal Government is encouraging people with genuine forex to bring them back home for investment in the domestic economy.
He said many of the corporate assets are not paying dividend to the government, and that has led to revenue loss. He said: “The International Monetary Fund advised us that domestic resource mobilization is key in our plan to boost revenue. Also, many of our corporate assets have not been paying dividends. We have oil and gas assets that are not performing optimally and that has to stop. We need to optimize assets lying dormant to boost capital position.”
He said that there are many companies that owe government but continues to do business with the government without settling their obligations.
“We are now debiting the account of such companies to recover the debts. Government business should be run as business where we have commercial interest,” he said.
Also speaking, Managing Director, Afrinvest West Africa Limited, Ike Chioke, advised monetary and fiscal authorities to rethink their anti-inflation strategies to holistically addressing the ugly narrative of surging inflation rate.
He explained that both the monetary and fiscal authorities have mainly been fixated on the control of money supply and selective tax reliefs.
“In our view, an effective strategy for taming the high inflation rate would be one that addresses structural bottlenecks (notably, insecurity and infrastructural gaps), improves ease of doing business, and incentivizes large-scale local production of agriculture and manufactured goods alongside effective liquidity management and proper anchoring of market yields to the Monetary Policy Rate (MPR).
“In all, we stress that failure to stem the surging inflation tide in the near term would result in a contagion financial sector crisis and by extension, derail other segments of the economy from the growth path, given banks’ pivotal role as an economic bridge between the supply and demand segments of the economy,” he said.
According to the report, Nigeria’s fiscal deterioration has continued unabated. After hitting the N70 trillion in 2022 due mainly to the N23.7 trillion addition from securitised Ways & Means liabilities, the total public debt profile nudged higher to N87.4 trillion in the first half of this year.
“This, in addition to underwhelming revenue performance in first half of 2023 (actual revenue, N4.1 trillion, underperforms pro-rata target by 26.5 per cent, and 99 per cent of it, N4 trillion was used to servicing debt) has further put Nigeria on the cusp of insolvency.
Against this backdrop, the new administration of President Bola Tinubu has introduced some policy measures to assuage the fiscal pressure, notable amongst which are the “partial” removal of subsidy payment on PMS, the increase in education tax by 50 basis points to three per cent, and the introduction of a 7.5 per cent Value Added Tax on diesel,” the report said.
Despite these measures, Afrinvest said it does not see a quick fix to the fiscal pressure in the near-term, given increasing internal and external pressure points on the economy and the time lag required for policy reforms to manifest gains.
The panelists at the event-Amal Hassan, Founder/CEO, Outsource Global; Robert Dickerman, Chief Executive Officer, Pinnacle Oil & Gas; Odunayo Eweniyi, Cofounder/Chief Operations Officer, Piggyvest; Anthony Okungbowa Esq., Head of Service, Edo State Government and Sadiq Kassim, Director, Corporate Affairs, TGI Group, all called on the government to take steps that will boost government revenue earning capacity and boost food security through support for the agricultural sector.
The report said there was need for new Central Bank of Nigeria (CBN) leadership to be geared towards reversing the unorthodox policy measures of the last administration, restoring market confidence in the CBN’s autonomy, and prioritizing the core goals of price and exchange rate stability.
“Nonetheless, we believe that achieving all of these in a short-term would be a herculean task, given that complementary fiscal policy actions are required for the CBN to record gains,” it said.
“In the meantime, we canvass that the authorities double down on efforts to check insecurity, curb oil theft, tame inflation, anchor market yield on Monetary Policy Rate, and improve the business environment. Also, we believe that the sustained high demand for FX in the parallel market due to lingering weak supply in the official market coupled with inefficient processing time, would continue to undermine the objective of these measures.”
“As regards the impact of the measures on the banking industry, we expect the re- introduction of the willing buyer, willing seller model to support a modest positive upside for the FX transaction income of banks going forward,” the report.
The event will attract dignitaries from private and public sectors, market leaders and stakeholders in the financial sectors who will discuss key issues that are necessary to get the country’s economy return to path of growth and development.
The Banking Sector Report, said: “As the new CBN leadership takes over, Nigerians and the banking industry are on the lookout for a positive and timely turnaround of stifling banking regulations and major monetary indices – exchange rate, inflation rate, and Foreign Portfolio Investment & Foreign Direct Investment flows,” the report said.
The report also provided highlights of the 2022 Nigerian Banking Sector report themed “Brace for Impact” which coincided with the onset of fresh global risks as the receding Covid-19 pandemic left deep footprints.
“This evolution of risks shifted focus from economy-stimulating policies to the introduction of guard rails for overheating economies. Specifically, the emergency adoption of the Modern Monetary Theory playbook in response to the pandemic dovetailed into a glut of financial liquidity. Although the broad stimulus deterred prolonged global recession, the absence of a commensurate productivity boost drove real and financial sector prices higher and threatened real output recovery,” it said.
