One strong message that came out of the recently concluded workshop of the Financial Correspondents Association of Nigeria (FICAN) is that the worst is over as far as the current recession is concerned. This, in the views of financial system analysts, is against the background of the measures being undertaken by the federal government to get the country out of the recession. Nothing demonstrates this more than the N753 billion capital spending released between June and October 2016 – considering also that nothing near this figure had ever been spent in a full year during the last decade!
This, at least was the consensus at the annual workshop organized and sponsored by Nigeria Deposit Insurance Corporation (NDIC) aimed at dissecting the recession ravaging the country. Aside serving the the purpose of highlighting the unique role of the financial press in managing and dissemination information to help the country navigate its way out of recession, the workshop also serves to bring the financial media and various financial regulators together with a view to understanding what measures the government is taking to see the country through the difficult, albeit winding economic recession.
For NDIC, it is a unique platform for its corporate social responsibility, in addition to ensuring that that the Nigerian public and the relevant financial stakeholders are kept well informed and to build a rapport and synergy with the financial press.
Indeed, NDIC has established this beautiful tradition, for many years now, of taking the annual event round the country to give it deserved national outlook. This time around Kaduna played host of the two-day event held from December 17-19, 2016. Scintillating presentations were made and digested through syndicated groups and far-reaching suggestions and recommendations proffered.
Reflecting on the theme of this year’s workshop which is “Economic Recession and Nigerian Banking Sector: Opportunities, Challenges and Way Forward”, the Managing Director of the NDIC, Malam Umaru Ibrahim described the role of the media as very significant and great one towards the development of the nation. He challenged the media to do more in this time of recession, which he described as tough and most difficult for the country. “The media”, he said, “can achieve this through most fair, objective, well-articulated news report and analysis of the government activities on continued basis”.
Dr. Abiodun Adedipe, one of the resource persons traced the current recession to the mid 1970s particularly the oil boom period. According to Adedipe, three significant economic issues confronted Nigeria by the turn of the 2000s: huge external debt, reaching about $36 billion; poor infrastructure and weak crude oil price, below $10/barrel at some point. The economy, then as well as now needed urgent fixing, but the purse was lean! According to Adedipe, the growth of Nigeria’s economy was robust until end-2014, averaging an annual 6.4% during 2001 to 2014. But in 2015, it grew by 2.79%, dragging the 15-year average down to 6.16%. Unfortunately, the positive growth was however, not accompanied by jobs – it was non-inclusive and exacerbated inequality, resulting in dismal development indices.
And while the signs began to show in early 2013, Adedipe listed some of these symptoms as; a lack of diversification of the economy, overdependence on hydrocarbons for foreign earnings and government revenue; bloated government recurrent expenditure; a high unemployment rate (13.3% unemployment and 19.3% underemployment in Q2), dominated by youth (49.5%, up from 42.4% in Q1); a low, but stable external reserves ($24.10 bn) and high cost of doing business and high cost of living (inflation at 18.3% in October 2016).
Another presentation by M.Y. Umar of the NDIC looked at the impact of the recession on the financial institutions. According to Umar, the impact of recession on particularly deposit insurance system (DIS) include the following: lower saving resulting in lower premium payment which represents a threat to the survival of financial institutions; mass loss of jobs; low investments; and rising sharp practices among banks among others.
On the regulatory measures taken to manage the current crisis, the director, Bank Examination Department of the NDIC A.A. Adeleke listed some of them as including the unbundling of universal banking; raising of the capital adequacy; whereas the global standard is 8%, it was raised to between 10 – 16% to create default capital buffer in times of recession; stress testing – banks were subjected to liquidity test such as computation of Basel II. Both the NDIC and CBN, he said, further undertook some special proactive measures such as early intervention against warning signals; consumer education and enlightenment and preventing speculations and de-marketing of banks.
On the role of the media, the chairman of the FICAN, Babajide Komolafe, opined that the financial media can offer its contribution to getting the nation out of the recession through reporting of opportunities available in the economy. This will help grow the economy. He held that investigative journalism can also help curb corruption, while the media can help encourage the populace to buy locally produced goods; by so doing, they will be growing the economy. He noted that this can be done through positive reportage on the good side of made-in-Nigeria goods.
The delicate issue of forex management under recession was discussed by CBN’s W.D. Gotring, who itemized some of the apex bank’s responses to the challenges of forex management to include closure of Retail Dutch Auction (RDA) window; adoption of interbank intervention; introduction of exclusion list (for 41 banned items); introduction of new flexible exchange policy; review of BDC operations; and introduction of forward and future’s market.
On declining asset qualities, Owo Godwin, a financial analyst, identified some of the measures taken to improve the quality as general economic improvement through diversification; fiscal and monetary policy harmonization; boost in domestic production and value added among many others. Needless to say the effects of falling oil price on the banking sector is visible to all to see. These effects include rising non-performing loans (NPLs); dwindling liquidity; declining solvency and declining profitability among many others.
Overall, the workshop challenged Nigerians to be ready for an inevitable recovery within the life span of the current Buhari administration. This is in view of federal government’s continuous efforts to diversify the economy; investment in agriculture, mining and infrastructure; enhancement of local manufacturing capacity; import substitution; fiscal discipline; patronage of made-in Nigeria products and services; and forex policy consistency among others.
- Hassan is financial system analyst based in Abuja.
