Foremost political economist Prof. Pat Utomi has canvassed the need for discipline, planning and a proper governance approach to improve the economy.
Utomi stated this at the breakfast meeting of the Society for Corporate Governance Nigeria (SCGN), held recently at the Oriental Hotels in Victoria Island.
Delivering a lecture themed “Nigeria Economy: Myths and facts”, Utomi described the nation’s current economy as a dé ja vu, clouded with uncertainties.
To become a global leader, Utomi said Nigeria must have a level of competitiveness, urging stakeholders to identify and focus on areas that would boost the economy.
According to Utomi, there was need for a growth framework in the nation’s economy to ensure that right policy choices were made, human capital, entrepreneurship and entrepreneurial skills adequately available.
Utomi also noted that growth and improvement of culture and value systems must be present and a proper leadership structure put in place.
He canvassed the need for affected stakeholders in the economy to be identified as well as an evaluation made on the impact of various choices made by them.
Utomi stressed the need for discipline and commitment of all stakeholders, especially as it relates to the credibility of the budget process.
Also speaking, the Chief Executive Officer, Economic Associates, Dr. Ayo Teriba noted that the nation’s economy has been greatly affected as a result of the global shocks thereby leading to a negative economic outlook.
Contrary to most beliefs, the fall of the naira, he said, was majorly as a result of a shortage of foreign exchange orchestrated by drop in oil prices and not necessarily the devaluation of the naira.
He noted that with or without oil, Nigeria remained the largest economy in Africa and will contribute $25billion out of the expected $100 billion of the whole continent.
Teriba explained that it has become necessary for the leaders to step aside and aggressively court foreign direct investments in order to boost the nation’s economy.
He emphasised the need to block leakages by stopping oil theft and abuse of the fuel subsidy regime, as well as duty/tax abuses.
Teriba also advised the withdrawal of ‘autonomy’ from all revenue-collecting agencies and capture value created by government interventions.
According to him, the government should encourage investors thereby causing either an outright liberalization or a co-partnership with the private sector.
“Strategic and impact component be infused in the budget planning with the sole aim of moving the economy forward and building an ultramodern nationwide rail transport system to reduce cost of manufacturing.
“Finally, monetary policy should be eased by demolishing existing monetary policy barricades. For Nigeria to reach its full potential and target, the leaders need to take full responsibility of planning and creating the adequate structures and policies needed to restore the economy,” he said.
THE Chief Executive Officer, Vertrag International Limited Olubunmi Oluwadare has said taht any country that strives for development must have the support of banks and entrepreneurs.
He told The Nation that banks must support Small and Medium Enterprises (SMEs) for the country to experience any meaningful growth, adding that countries, such as China, India and Turkey that have grown their economies did so through partnering with private businesses and the SMEs.
Oluwadare said the challenge of entrepreneurship in Nigeria is the banks, saying no country grows without entrepreneurs.“Banks should invest in entrepreneurs as it is better to have 10,000 entrepreneurs bringing money into the bank than to have an individual’s money,” he said.
He said seeing investment in SMEs as a risk factor is an excuse, noting that every business is a risk. “What the banks need to do is to create departments to handle these entrepreneurs. When the entrepreneurs come to the banks for partnership, the banks should not just give them the funds, but should be part of the business from the beginning so that they will know that the money they are investing is coming back to them.”
He said the main challenge to job seekers who want to venture into SMEs is that the banks are not helping entrepreneurs to grow. “Government can handle infrastructure, but they cannot do business because they are not good managers of business. The government alone cannot create jobs; it is entrepreneurs that create jobs. If entrepreneurs are provided with funds and are able to create jobs, unemployment will reduce,” he said.
He therefore urged the banking sector to look inward and focus on entrepreneurs, not on the people that steal government’s money, or the people they give money to because they have colateral, who may never pay back the money.
Oluwadare said it is better to have few functional banks than to have many that are not functioning.
“Now there is problem everywhere; economy is not in good shape, the banks should sit down and see how they can channel the money to build entrepreneurs. Every business is a risk and when you can’t take risk, you lose everything. You don’t have to give the entrepreneurs the cash, but you can buy all they need to start the business for them, as you are realising the money, you will monitor the business as it is going, don’t leave them alone because your money is involved and you will collect it back with interest,” he said.
He said the challenge with Nigerians is that they want to start a business and make the money immediately, adding that they do not want to be involved in a long term business. “Every business will have a patient time but our banks are not patient, they want quick money which cannot work in entrepreneurship journey,” he said.
He lamented that Nigeria is not leveraging on anything, saying that nearly every sector is untapped, including, tourism, culture and entertainment.
“Most of the people causing traffic are those looking for jobs, who will wake up every morning, over 4000 youths are on the road every day looking for jobs. If there were jobs, most of them will be in the factory for months before they return. If the unemployed people are reduced, crime will reduce, government expenditure on security will reduce and the money spent on security will be diverted to job creation,” he said.
The Chairman and Chief Executive of The Bazaar Limited, a growing player in the retail outlet and food chain business in Nigeria, Mr. Rajesh Mehta, has praised Sterling Bank Plc for its contribution to the economic growth of the country.
The industrialist, who spoke at the opening of The Bazaar Retail Store outlet in Ogba, Lagos, said the lender has been providing adequate capital for its customers across the value chain in all the sectors of the economy.
He said the provision of capital and other advisory services by the bank has boosted the growth of his business. “Sterling Bank is indeed a bank of choice. We have been banking with the bank for the past 20 years. We started with one of its legacy institutions- Magnum Trust Bank and we have come this far because of the quality of banking services we enjoy from the bank. Apart from the provision of capital, the advisory services provided by the bank stand out in the industry and its staff are adequately trained to support the business growth of their customers,” he said.
According to the Euromonitor International, a leading independent provider of strategic market research globally, Nigeria’s retail business has become more organised in recent years. The huge demand posed by the population of the country has made the country a hotbed for international retailers and investors. It is expected that this trend would be replicated across the various sectors of the economy.
Corroborating the claims by Mr. Mehta, the bank assured that it will continue to support the growth of both new and existing businesses in various sectors of the economy “No business can run successfully without sufficient working capital”, the bank noted.
The bank said it is already equipping the operators in the Micro Small and Medium Enterprises (MSMEs) segment with the right skills to effectively manage their businesses for success.
“Last year, we organised the first MSME Academy which was well attended by operators in this segment to equip them with the right skills and minds set to effectively manage their businesses for success. In response to the positive feedback and customers’ request, we are expanding the academy to more locations across the country.”
Nigeria’s economy faces low economic growth prospect, a survey by KPMG has shown.
According to the report, a group of Chief Financial Officers were interviewed in a survey by the consulting firm.
The CFOs are worried about business risks, as well as the economic slowdown and the falling oil price.
Its Partner and Head, Audit Services, Mr Tola Adeyemi, said the CFOs were the least optimistic about growth, The other concerns are uniting leaders, increasing taxation and regularities complexities. And the continued slowdown in the economy, according to them has heightened fears that a key engine of growth is stalling. There are also worries about the impact of falling oil revenues on the overall economy.
The CFO, he noted, observed that the threats they face are becoming more complex with exchange rate instability and the state of infrastructure.
One issue also identified is lack of balance in the economy. As a result, the rewards of a growing economy are not shared equally, leaving some sectors feeling markedly stronger than the others.
The business suggested growth levels across most sectors slowed considerably.
With the budget presentation, however, Adeyemi said the economy appears to be on path to a period of sustained good health if the government improved on infrastructure.
The Infrastructure Bank Plc has expressed its commitment to deepen the funding of key facilities that will promote growth and development of the economy.
Speaking at a media briefing in Lagos, the bank’s Managing Director, Adekinle Oyinloye, said the lender is predominantly focused on Nigeria, and its option to be a regional player will be considered at the right time.
He listed some of the projects as the $1 billion rehabilitation and reconstruction of the 127 kilometer Lagos-Ibadan Expressway.
He said the lender’s engagement is in its capacity as Advisor and Finance Arranger to the Federal Ministry of Works, to secure funds required to implement the EPC contract for the rehabilitation, reconstruction, and expansion of the 127 kilometer dual carriageway.
He put the project cost at N167 billion, adding that the funds are to be disbursed in two tranches, under a private finance scheme.
He said the bank is collaborating with key stakeholders, including the Federal Ministries of Finance and Justice, as well as local and international financial institutions, which have made indicative offers to participate in the financing scheme.
Oyinloye said the bank is also involved in the development of the 280 kilometer green field dual carriage expressway from Abuja to Ibadan, Oyo State, through Kwara State.
As he put it: “Acting in the capacity of the project developer and lead member consortium, the bank is leading a consortium to develop a 460 kilometer greenfield dual carriage expressway from Gwagwalada, in the Federal Capital Territory, which will cross the River Niger to link the Federal A1 road in Kwara State. It will also connect the Lagos-Ibadan expressway on a design, build and finance, operate and maintain basis.”
He said the roject is estimated to cost N210 billion.
The Infrastructure Bank chief, also listed the Osun State Oshogbo-Ila Odo Road, as among the projects it is engaged in, saying the lender is the preferred bidder on the Lagos metro rail transit, covering a 37 kilometer rail line from Alagbado to Marina with a project capital expenditure of $2 billion and development of 20,000 mass housing units for Federal Paramilitary Forces.
Also in the list is the $1 billion renewable energy and efficient energy projects in the 19 Northern states and N25 billion public mass transit revolving fund.
“The selected track record is but a tip of TIB’s current activities. However, it is chosen to demonstrate the breath and depth of the bank’s impact and potential to effect transnational change nationwide,” he said, adding that TIB is driving projects across the six geo-political zones in Nigeria; working with both public and private sector promoters and sponsors.
Director-General, African Centre for Supply Chain Obiora Madu has urged professionals to stimulate higher business growth in the economy through improved activities.
Addressing the fellowship investiture and induction ceremony of the centre in Lagos, Madu said Trade and Investment Minister Okechukwu Enalamah has called on professionals to tap into business opportunities and support the nation’s ambitious economic development plans.
African Centre for Supply Chain, he noted, provides technical assistance for professionals, entrepreneurs and large businesses to grow and create local jobs while also benefiting from their creativity, growth and innovation. These ranged from developing a functional supply chain, preparing for the public procurement process, enhancing the service offer alongside the supply of products and building strategic alliances with other small businesses in the supply chain. Supply Network Operations Manager,Procter and Gamble, Temitope Ogunfayo said a reliable brand strategy will help entrepreneurs make inroads in the minds of their customers and will ensure that all products and services have a visual identity and good positioning in the sector that they operate in.
A good brand strategy, he added, can help entrepreneurs create a niche of their own and enable their target audience to identify and differentiate their brand in the cluttered marketplace.
IN the national quest for alternative sources of energy to boost economic development, the Ibrahim Badamasi Babangida University, Lapai has commissioned a team of researchers to assess coal deposit in four states of the country to be used as raw materials for the production of new brand of smokeless source of energy in homes.
Vice-Chancellor of the university, Prof Muhammad Maiturare while commissioning the team said that the project, code named: “Clean Coal Project” and worth N21 million, was listed among 13 projects that received awards based on the competitive Tertiary Education Trust Fund (TETFund) National Research Fund Expert Assessment in June.
He explained that besides University of Ilorin, the IBB University was the only other institution in northern Nigeria that won awards.
Maiturare admonished the department of Geology & Mining and research team to comply with the timelines set for the project so that other research proposals of the university to the TETFund could be considered.
Applauding the Federal Government for providing a window of opportunity to Nigerian universities to undertake application-driven innovative researches through TETFund, the Vice-Chancellor said that such projects help to develop capacities of students and upcoming researchers as well as provide additional equipment for universities.
Earlier in his presentation, the leader of the research team who is also the Dean, Faculty of Applied Sciences and Technology in the university, Prof Nuhu Obaje, explained that the types of coal needed for the project were deposited in parts of Nasarawa, Kogi, Benue and Niger States, pointing out that preliminary investigations by his team revealed that the areas had the mineral resources in large quantities.
Obaje said clean coal would help to reduce the hazards of green-house emissions and preserve forests in the country.
He said the project was in collaboration with the Department of Geology, Ahmadu Bello University, Zaria and expressed optimism that the new energy product would be available to rural communities so as to curb incessant felling of trees for firewood by villagers.
Improving earnings and broadening the capital base for enterprises remain indispensable if appropriate economic growth and employment are to be regained in the economy, the National Vice- President, Nigerian Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), Chief Adebowale Omotoso, has said
Chief Omotoso who spoke yesterday in Oyo town at a business forum, said the Nigeria Stock Exchange (NSE), through its operation, provides avenues for governments and corporate entities to effect optimal financing and broaden their capital base.
Such sound financial services, according to him, will serve as a hedge against the vagaries of business and economic cycles, which in recent times, have shaken the national socio-economic system.
He said: “It is worth repeating that, Nigeria ’s vision of long term economic development based on a virile real sector requires huge capital outlay for its realisation. It also calls for a reorientation of existing approach to projects financing. We must therefore look beyond the commercial banks and donor agencies to meet our financial needs, especially for long-term purposes. Our financing option is in the stock market, which must be supported to successfully discharge its crucial role in financial services delivery.”
While enumerating issues that require immediate official intervention to include the need to maintain policy consistency, accelerate the implementation of privatisation programme, and get the oil and gas companies and telecommunication companies to list on the NSE for broader and deeper stock market.
What are the long term economic implications of the Central Bank of Nigeria’s (CBN’s) ban on importers from accessing foreign exchange (forex) for some commodities? It will boost the economy, say experts. But they are appealing to CBN to support the building of sustainable infrastructure to make local production attractive, increase export earnings and create jobs, writes COLLINS NWEZE.
It was a decision long awaited by those who have the interest of the country and the economy at heart. For those who understand why the foreign exchange reserves and naira value have been down, it was welcome.
So, when Central Bank of Nigeria (CBN) Governor Godwin Emefiele banned importers from accessing forex for 41 items, especially those irrelevant to job creation and real sector growth, it was seen as a way out of the quagmire.
The CBN boss had campaigned against frivolous importations. “The only thing that will reduce pressure on our currency is by producing those things we are importing today. We will try as much as possible not to hurt your business, but we need to be able to work together,” Emefiele told the Bureaux De Change (BDC) operators and bank chief executive officers at a forum in Lagos in January, as the impact of declining oil price started having grave implications on the naira and reserves.
For instance, the naira is now exchanging at N230 to the dollar at the black market, while the reserves, standing at $29 billion, can only provide four-month import cover. Still, a large part of the reserves is being used to provide forex for the importation of private jets, rice, textiles, tomato paste, poultry products and 35 other items.
Providing forex for the importation of some of these items, which can be produced locally, is limiting government’s efforts in importing critical machines needed in power plants and road construction, among other amenities. Therefore, the CBN, in a circular dated June 23, said the implementation of the policy would help to conserve foreign reserves and facilitate the resuscitation of domestic industries as well as generate employment.
The circular, which was signed by the Director, Trade and Exchange, CBN, Mr. Olakanmi Gbadamosi, said it was imperative to exclude importers of some goods and services from accessing foreign exchange in order to encourage local production of the items.
“The implementation of the policy will help conserve foreign reserves as well as facilitate the resuscitation of domestic industries and improve employment generation. For the avoidance of doubt, please note that the importation of these items are not banned, thus importers desirous of importing these items shall do so using their funds without any recourse to the Nigerian foreign exchange market,” Gbadamosi said.
• Amangbo
Zenith Bank Managing Director/CEO Mr. Peter Amangbo said the CBN’s forex policy, including the ban placed on some commodities from accessing forex from the official window, could be positive in the long-run because there are local substitutes for each of the affected products. “CBN acted well. When you have scarce resources, you allocate it to areas of importance. We’re not in a hopeless situation,” he said.
Likewise, former Executive Director, Keystone Bank, Richard Obire, said the latest policy is expected to encourage importers to look inwards and begin local production as the prices of the affected items will shoot up in the market because of high cost of buying forex from the black market.
He said in the long run, the benefits of the CBN’s decision, will outweigh whatever temporary pains it may have at the moment. “Those who decided to produce those goods locally and export them, will earn foreign exchange instead of depleting the reserves. In the short-to-medium terms, it will be painful but subsequently, it will improve the overall economy,” he said.
He said even the International Monetary Fund (IMF) believes that the CBN should protect the reserves because of the huge benefits of such decisions on the naira. “If the CBN keeps funding these items, the demand for the dollar will rise and this will affect its push for infrastructural development needed to boost the real sector,” he said.
• Obire
He said the policy can be used to achieve developmental objective, adding that using the available capacity to produce locally, will reduce overall demand for forex and when the local production is enhanced, more people will find jobs within the economy.
However, for exporters, the policy means increased cash flow and higher profit margins.
The Managing Director, Dairy International Limited, Peter Anjorin, who exports Nigeria timber to China and Vietnam, captured the excitement that came with the decision. “This policy will create more millionaire-exporters than ever before. I was so impressed with the news that I called my associates together to wine and dine with me,” he said.
Anjorin said the CBN needs to help the real sector by supporting the development of key infrastructure to reduce cost of production.
He urged that the effort of the CBN to boost infrastructure should be sustained. He said the CBN’s plans on real sector growth, including the N300 billion Real Sector Support Facility (RSSF) established to unlock the potential of the real sector to engender output, value added productivity and job creation, should be sustained. The facility would support large enterprises for start-ups and expansion of the financing needs of firms of up to N500 million and a maximum of N10 billion.
“The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors. The facility is expected to improve access to finance by Nigerian Small and Medium Enterprises (SMEs) to fast-track the development of the manufacturing, agricultural value chain and the services sub-sectors of the Nigerian economy; increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide inputs for the industrial sector on a sustainable basis,” he said.
There is also the N213 billion Nigerian Electricity Market Stabilisation Facility was aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). The facility covers legacy gas debts and the shortfall in revenue during the Interim Rule period (IRP). It is expected that this will guarantee the take-off of the Transitional Electricity Market (TEM). Already, N56.68 billion disbursed to five generating companies and five distribution companies.
These steps, he insisted, should be sustained to reduce the high cost of production, and make local exporters to get the needed benefits from the policy.
An operator, Michael Obinna of SunDavies International, said by supporting local production, the CBN will enable local producers to improve volume of export. “When the volume of export is increased, there is need for expansion and earning of higher forex. This will create opportunity for the exporters to increase their capacity and create more jobs,” he said.
He regretted that many real sector operators are boosting job opportunities in other countries and depriving their citizenry of jobs by making some frivolous importations why also calling on the government to speedily diversify the economy.
“How can Nigerians be importing cement, margarine, palm kernel, vegetable oil, poultry products (chicken, eggs and turkey), Indian incense, tinned fish in sauce (Geisha, Sardines), cold rolled steel sheets, galvanised steel, roofing sheets, wheelbarrows, head pans, metal boxes and containers, and enamelware which can be produced locally. It is a good thing that the CBN is correcting this anomaly,” he said.
But an economic analyst, Biodun James, said while the move may douse some of the demand pressure in the short run, there is a lot of expectation that the CBN will further devalue the local currency. “Market is still expecting a lot from the CBN in terms of foreign exchange policy. The apprehension that the CBN will devalue again has not subsided because the reserve is still under pressure,” he said.
“We see this policy move as confirmation that forex supply remains extremely tight. But more worrying is the fact that it suggests that the Central Bank remains reluctant to devalue the naira,” said Yvonne Mhango, sub-Saharan Africa economist at Renaissance Capital, an investment and research firm.
She said there was need for Nigeria to seriously rethink her forex policy to spur investment and quicken economic recovery.
But the CBN has also taken other steps meant to preserve the reserves. The regulator has said it will investigate travelers breaching the rule on $10,000 maximum cash or negotiable instruments across the borders.
CBN Director, Corporate Communications, Ibrahim Mu’azu, said that henceforth, the transportation of cash or negotiable instruments in excess of $10,000 or its equivalent by individuals in or out of the country shall not be allowed unless such funds are declared at the borders.
He also said those that go contrary to the law will have to forfeit the undeclared funds or negotiable instrument or to imprisonments to term of not less than two years or to both.
He expressed CBN’s concerns on the increasing trafficking of huge sums of foreign currency across the borders. He said the practice is in defiance of the extant dictates of Section 2 (Sub-Section 3 to 5) of the Money Laundering (Prohibition) Act 2011 (as amended).
The law, he said, stipulates that transportation of cash or negotiable instruments in excess of $10,000.00 or its equivalent by individuals in or out of the country shall be declared to the Nigerian Customs Service. Also, the Nigerian Customs Service shall report any declaration made pursuant to Sub-Section (3) of this section to the Central Bank of Nigeria.
“Any person who falsely declares or fails to make a declaration to the Nigerian Customs Service pursuant to section 12 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, F34, LFN, 2004 is guilty of an offence and shall be liable on conviction to forfeit the undeclared funds or negotiable instrument or to imprisonments to term of not less than two years or to both,” he said.
Mu’azu said that on receipt of any notice of declaration from the Nigerian Customs Service, the CBN will investigate the source of fund and seek justification for the possession of such volume of cash to ensure that no money laundering activity is involved.
“Those affected will also be expected to provide evidence of payment of taxes and duties related to the cash transaction. For the avoidance of doubt, the general public is hereby notified that the CBN (in collaboration with other relevant regulatory and security agencies) will promptly apply appropriate sanctions and penalties for contravention of the provisions of this Act,” he said. The apex bank also ruled out possibility of BDCs providing forex to importers of products on the classified list.
Eurozone business activity rose at its fastest pace in four years in June, boosted by higher spending by consumers and businesses, a survey has indicated.
The final Markit composite eurozone Purchasing Manages’ Index (PMI), which combines manufacturing and services activity, rose to 54.2, its highest reading since May 2011. Any reading above 50 indicates growth, while below 50 points to contraction.
Markit said the data pointed to second-quarter economic growth of 0.4%. It comes despite concerns over the possibility of a messy Greek exit from the euro.
Speculation that Athens would miss a €1.6bn repayment to the International Monetary Fund (IMF) held back manufacturing activity in the month, Markit said.
But the European Central Bank’s (ECB) massive €1 trillion bond-buying programme announced in March was beginning to help the service sector, with activity running at its fastest rate since mid-2011.
Markit said the ECB stimulus programme – combined with low inflation – had boosted spending and investment across the eurozone, as consumers and businesses splurged their cash in an attempt to beat expected price rises.
“Despite the escalation of the Greek crisis in the second half of the month, the final PMI for June came in slightly above the ‘flash’ estimate, suggesting the turmoil has so far had little discernible impact on the real economy,” said Markit’s chief economist, Chris Williamson.
But he noted companies continued to cut prices to help boost sales, as they have since early 2012.
The composite price index was 49.4, below May’s reading of 49.5, suggesting prices are still falling and that the ECB’s battle with low inflation across the currency bloc has some way to go yet, despite official estimates suggesting a slight increase in inflation.
Price discounting helped drive up the PMI covering the service industry, which makes up the bulk of the eurozone economy. It rose to 54.4 from May’s 53.8.
