President Muhammadu Buhari |
The
Administration of President Muhammadu
Buhari recognises this immediate need for adjustment. For instance, unlike
Russia which budgeted on $50.00 a barrel price for oil in 2016, the Benchmark
Price for oil in the Nigerian budget proposal is $38.00. This tends to counter
the argument that Nigeria’s 2016 budget is overboard on oil price optimism. But
this is by the way.
Right from
inception of the administration last May, when the Brent Crude was still
selling at a decent price range of $55 to $60.00 a barrel, President Buhari
signaled his preparedness to move forward the agenda of structural
diversification of the Nigerian economy. The 2016 budget proposal seeks to
stimulate investments in infrastructure, agriculture and solid minerals.
Nonetheless, economic diversification requires funding. The cumulative gain
from last ten years of high oil prices was the fillip we should have seized to
make much more progress with this agenda. But it didn’t work out like that.
The
adjustments we need to make as a country now are pointedly two-fold. We have to
curb imports by boosting domestic production. And we have to develop local
capacity to produce non-oil value-added products for export. We no longer have
the benefit of high oil price to delay further actions on either of these.
While it is true that the capital controls may have inadvertently impacted some
activities negatively – and happily the President and the CBN have promised to
continue to fine-tune the foreign exchange regime – import substitution and
diversification of export base have no viable substitutes for long-term
performance of the Nigerian economy.
The
inconvenience will not last forever. But it would last in the period that we
all have to make the psychological adjustment. Recent monetary and fiscal
policy decisions will have to penetrate the system with the desired effects.
Financial institutions would have to respond positively to the policy priority
of improvement in real sector and SME funding. We have reached a critical
turning point in economic management in our country. This portends to be for
good.
The CBN
upheld its Monetary Policy Committee decisions of last November at its January meeting.
The main reason would be to allow the banks to respond to the November
decisions, which initiated a process of injecting additional liquidity in the
banks. This was by way of reduced Cash Reserve Ratio, from 25 per cent to 20
per cent. This liquidity, estimated above N1 trillion, would filter into the
system only through lending to real sector businesses and Small and Medium
Scale Enterprises. These are the sectors that will underpin the strength of the
Nigerian future economy.
This
targeted credit boost, however, requires the banks to develop additional risk
management capacities and new credit products. Some of such products have
started to reach the market, like the one that now wants to help SMEs improve
their capital assets. Such facilities would improve operational efficiency and
outputs of domestic producers and manufacturers.
The Nigerian
Export – Import Bank, which has the responsibility for promoting non-oil
exports, is scaling capacity to intermediate external sector revenue
generation. One of our latest activities includes collaboration with the CBN to
create additional funding resources for Nigerian export manufacturers. This has
led to the creation of a new N300 billion Export Stimulation Fund that will
lend at nine per cent interest rate.
This fund
targets immediate impacts. Our quick-win strategy is to expand the businesses
of companies that are already exporting; to give them funding to produce and
export more. This facility is in line with the fiscal outlook of the Federal
Government, which requires helping the private sector to generate additional $2
billion in non-oil exports in 2016.
Inadequate
financing, according to the CBN, had led to the drop in government’s non-oil
export revenues from $10.53 billion in 2014 to $4.39 billion in 2015.
Nigerian
export manufacturers, like other critical stakeholders in the economy, need to
step forward and embrace government’s efforts. For too long, the profile of
Nigeria as a predominant oil exporting-country had stuck, and with no
correlating benefits. While aggregate domestic credit to the economy has been
on the rise, credit to non-oil exports has been declining at an average of 0.6%
of total domestic loans to the private sector in the last five years, according
to data from the CBN. We are set to reverse this.
At NEXIM
Bank, we look forward to working with Nigerian businesses that would help
rebalance our economy more in favour of domestic production and non-oil
exports, against dependency on oil revenue and unbridled importation of consumer
goods. In the medium- to long-term, we will see a significantly transformed
Nigerian economy for our benefits. (Guardian)
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