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Nigeria rejects IMF’s stance on forex restriction policy - THE NATION

OCTOBER 21, 2019

- Foreign investors should produce here, says Emefiele - World Bank’s $3b power cash coming

 

NIGERIA has rejected the advice to reverse its policy on restriction of foreign exchange on 43 items that can be produced locally.

The country disagreed with the International Monetary Fund (IMF) that the policy was making foreign capital inflow into the country difficult.

 

Central Bank of Nigeria (CBN) Governor Godwin Emefiele, who spoke at the end of the 2019 International Monetary Fund (IMF)/ World Bank Annual Meetings in Washington D.C. said: “If you are a foreign direct investor interested in doing business in Nigeria, I will say instead of you facilitating the import of these items into Nigeria, we want you to come and produce it in Nigeria.

“Nigeria is a market of over 200 million people. So, you do not have a choice than to come, bring your investment plans and equipment and produce that item in Nigeria so that Nigerians can consume it.

“Then, you will make your profit and take your dividend out of the country.

“So, I disagree with that position that foreign exchange restriction is hurting investment inflow into Nigeria.”

Emefiele spoke on the disagreement between telecom operators and banks on the Unstructured Supplementary Service Data (USSD) fees.

Telecom operators plan to charge N4 per 20 seconds on USSD access to banking services from October 21.

Emefiele said he appealed to the telecoms companies to reduce the proposed charge.

He said: “I understand that about three to four weeks ago, rather than reduce it, they went ahead to increase from N1500 to N4500, which is a 300 percent increase. I opposed it and I have told the banks that we would not allow this to happen.

“The banks are the people who give these businesses to the telecoms companies and I leave the banks and the telecoms companies to engage.

“I have told the banks that they have to move their business and move their traffic to a telecoms company that is ready to provide it at the lowest possible cost if not at zero cost and that is where we stand and we must achieve it.”

Emefiele said banks had done well regarding the Loan to Deposit Ratio (LDR) policy.

“Most of them have worked with us and we saw loans rising from about N15.3 trillion in the banking industry in July to, as at the last time we held the meeting, about N16.3 trillion, which is a remarkable and phenomenal increase.

“These loans are being channeled not only to agriculture, but to manufacturing, to Small and Medium Enterprises (SMEs), and consumer credit.”

Emefiele added that the banking sector remains strong, adding that the 65 per cent Loan to Deposit Ratio (LDR) policy has increased industry loan position from the initial N15.3 trillion to N16.3 trillion.

On the recent banking sector stress test that showed liquidity gaps in seven commercial banks, he said: “Stress-testing has become part of our normal routine, in trying to check the strategic health of all the banks in the industry.”

He said banks found to have failed on a particular ratio, such as capital adequacy and liquidity, is asked to improve on it.

“If for instance, they fail capital adequacy ratio, we counsel them about how to resolve it. So, it has nothing to do with the weakness of any bank that would lead to any panic or systemic crisis in the industry,” Emefiele said.

Also yesterday, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said the Federal Government is routing for $3 billion from the World Bank, to be invested in the power sector.

Speaking at a joint briefing with Emefiele, Ahmed said the funds would come in four tranches of $750 million each.

She said: “This financing will include addressing the gap between what is provided for in the current tariff and the cost of the businesses.

“There is a tariff shortfall but it would also enhance our ability to pay the previous obligations that have crystalised that we have not yet been able to pay.

“Some portion of it will be for the transmission network and if we can expand the facility to $4 billion, the additional $1 billion would go for the distribution network. It will help us to exit the subsidy that is now inherent in the power sector.”

Ahmed said the Nigerian team requested for technical assistance from the bank for implementing agencies, especially the Nigeria Electricity Regulatory Commission (NERC), on the review of the performance improvement plans of the distribution networks.

“We put a request for financing of the sector at the range of $1.5 billion to $3 billion. At the end of the day, it is like we would be looking at the funding size of $3 billion that will be provided in four tranches of $750 million each.

“The plan is for the team to go to the World Bank for the approval of the first tranche in April 2020.”

Ahmed said the Federal Government plans to issue naira-denominated jolly bond to support infrastructure financing.

She said: “The CBN will be leading in this effort. We will also explore all options in this regard at the next UK investment summit that will be holding in January 2020.”

Ahmed said the Jolly Bond would be issued offshore but denominated in naira, adding that the country would be protected from exchange rate exposure.

On the border closure, Ahmed said the exercise was not meant to be vindictive.

According to her, with the African Continental Free Trade Agreement (AfCFTA), there was the need to ensure that the rules are obeyed; otherwise, local industries’ growth would be hampered.

She pointed out that businesses had been suffering due to the activities of smugglers.

The minister said the border closure was not permanent, adding that there are lots of discussions going on.

 

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