Economic experts and players in the real sector have expressed displeasure with the monetary policies introduced by the Central Bank of Nigeria in an attempt to revamp the economy.
Specifically, the experts frowned at CBN’s order to Deposit Money Banks and other authorised dealers in the foreign exchange market to allocate 60 per cent of their total Forex purchases from all sources to manufacturers.
They expressed concern that so long as critical monetary indices continued to challenge the creation of vibrant economic activities and job creation opportunities, competitive production output cannot be sustained across sectors.
According to them, an inflation rate beyond four per cent will be unacceptable in developed climes but Nigeria’s rate has never fallen below upper single digit rates in recent times.
Analysts noted that with real sector cost of borrowing hovering between 20 and 30 per cent, it will be unduly optimistic to expect Nigerian products to successfully compete against imports from countries where lower single digit interest rates and supportive infrastructure make export prices more attractive.
Consequently, sustaining the hope that diversifying the economy will evolve despite the challenges mentioned above.
This is in addition to constant complaints of high cost of funds and the self-provision of public infrastructure to their businesses by real sector operators.
SELECTIVE RATES COUNTERPRODUCTIVE – EXPERTS
A cross-section of economic analysts who spoke with The Point, advised the CBN to always consider the pros and cons of its policies before implementation.
An economic expert, Mr. Henry Boyo, expressed concerns over the adoption of selective interest rates for some sectors, which he believes had failed to induce the envisaged positive value chain of economic activities owing to paucity and difficulties associated with access to such loans.
“One may, however, wonder why foreign loans, over which we have no control, are usually cheaper than the rates on domestic loans, over which our monetary authorities have absolute control,” he said.
Boyo added that a steady hardening of the Naira exchange rate will gradually promote public preference of the Naira as a stronger store of value than the dollar.
“Evidently, as long as the CBN continues to tackle the problem of an ever sliding Naira rate from the prism of demand for dollars rather than frontally addressing the surplus Naira, the end of our economic dislocation will never be in sight,” he said.
He explained that the currency peg for the Naira and foreign-exchange trading restrictions by the apex bank led to shortage of goods from fuel to food items, and that contributed to the contradictions in the first half of the year.
Taking a cue from 2015 economic indices, a stockbroker, Mr. Abraham Adams said that the Nigerian economy, like other emerging markets, was severely hurt by the global shock witnessed last year. “Almost all the economic indices were negatively affected and growth plummeted. The year is the worst hit since the economic meltdown in 2008,”He noted that the local currency continued to depreciate against the dollar within the year due to many factors, key among which was the consistent fall in the price of crude oil.
However, the Managing Director, Investment Advocates Limited, Mr Wale Dada, argued that Nigeria’s problem is not the fall in oil prices. “The fact is that if you do a thing the same way, you achieve the same result. We must do things differently if we want to move the economy forward and meet the expectations of the people.
“FG has overburdened itself with a lot of powers and responsibilities, including those that are most appropriately undertaken by state and local governments. Nigeria has practiced top to bottom (federal to local government) process of governance for so long and has continued to achieve unfavourable result. It is time to practice bottom to top (local government to federal) system of governance where the bulk of funds goes to the local government and the least to the federal,” Dada added.
COMPANIES SHOULD ENGAGE FOREIGN COMMUNITIES – DIPLOMATS
Although, Nigeria is one of the rapidly-growing economies in Africa, international investors are still wary of the corruption and instabilities in the country. Development of the nonoil sectors, such as manufacturing and agriculture may help to alleviate Nigeria’s reliance on the oil industry, ensure sustainable economic growth and attract investment.
On the need for strengthening interstate relations and regional competition, the Italian Consular-General in Nigeria, Mr. Andrea Pompermaier urged Nigerians to make concerted efforts at engaging the international investment community to showcase Nigeria’s latent potential and resources.
Pompermaier noted that the country had so many resources that could attract global investment but the country’s international profile had been largely dominated by its crude oil and sleaze.
According to him, the time has come for Nigeria to market its abounding opportunities to the global investment community for a broader view of the country, its resources and people.
The envoy said his personal experience had shown that some of the international opinions about Nigeria were misplaced.
He assured that his consulate would work to further strengthen the bilateral relationship between Nigeria and Italy by bringing Nigerian and Italian businessmen together.
INDUSTRIALISTS KICK
The Manufacturers’ Association of Nigeria is also bitter over several monetary policies they described as frustrating. The national president of the group, Dr. Frank Jacobs, said: “We are very concerned about the high interest rate that banks charge manufacturers. Though government is serious about diversifying the economy, it cannot do so with the level of interest regime that obtains currently.
“We are concerned and we are hoping government will do something to reduce the interest rate to between three per cent and five per cent. That is the sure way to truly diversify the economy.”
Another industrialist, Mr. Remi Ogunmefun, explained that most of the developed economies were big because of the contribution of small businesses to their Gross Domestic Product and employment generation.
According to him, the smallscale industry is a special class of business, which, in fact, should be treated with caution.
“An interesting feature of this class of business is that it is much less capital intensive and yet a key driver of employment. Unfortunately, notwithstanding being less capital intensive, they are faced with the prevailing harsh business environment brought about by the acute shortage of economic infrastructure such as power supply, high cost and unfavourable terms of credit, among others,” he stated.
