• FG updates rating agencies on steps to revive the economy •Says 13% disbursement of funds on World Bank projects too low •Emefiele: CBN will continue to fine-tune flexible forex policy to bring out its best
By Chika Amanze-Nwachuku, Obinna Chima and Zacchaeus Somorin in Washington D.C
In line with its determination to revive the Nigerian economy, the federal government yesterday revealed that the Development Bank of Nigeria (DBN), a financial institution that would bridge the gap between the Bank of Industry (BoI) and other commercial banks as well as meet the funding needs of the micro, small medium enterprises (MSME) would soon become operational.
In fact, the recruitment exercise for the DBN has been finalised and a total of $1.3 billion would soon be released for the take-off of the institution.
The Minister of Finance, Mrs. Kemi Adeosun, disclosed this while speaking to journalists in Washington D.C, on the outcome of the International Monetary Fund (IMF)/World Bank annual meetings, said agreement on the DBN was reached at the meetings.
This is just as the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele who was also at the briefing, assured Nigerians that the central bank would continue to look at how to fine-tune the flexible exchange rate regime so as to ensure exchange rate convergence.
The DBN is being supported by the World Bank and the European Investment Bank.
However, checks by THISDAY yesterday showed that a website has already been created for the institution, which is expected to go live soon.
“Agreement was also reached on the final steps for the take off of the Development Bank of Nigeria which had been stopped due to some issues, we have resolved all those issues, the recruitment process has now been finalised with management team put in place and this will release $1.3 billion which is aimed at supporting our SMEs and SMEs are part of the engine that will spur the growth of our economy, SME lending at low rates will now be facilitated through the DBN and we are ready to resolve the outstanding issues,” she said.
She also disclosed that the Nigerian delegation at the meetings met with the three biggest rating agencies – Fitch, Standard & Poor’s (S&P) and Moody’s in order to update them on developments in the Nigerian economy.
“We met with the rating agencies. As you know they recently had some rating actions on Nigeria. We met with Moody, Fitch and S&P had interactive session with them updated on our economic plans and giving them the picture of what we are doing, overall , it was very positive engagement we have some takeaway and we remain very confident that that the strategy we are pursuing will result in some quick recovery to the Nigerian economy.
“We had validation of our economic strategy. That is, our strategy to transform Nigeria from consumption driven to and investment driven model and while in the short term, there has been some pain and some dislocation, the long term economic outlook for Nigeria remains confident.
“We had a number of specific bilateral meetings with UK Department for International Development, the US treasury and other partners,” she revealed.
Furthermore, the finance minister disclosed that based on the federal government’s commitment to reverse the trend of illicit financial flows which had seen significant money flow out of Nigeria, some high level agreements on a number of initiatives, which she declined to disclose, were reached at the meeting.
Adeosun explained: “This, we believe can bring significant repatriation of money into the Nigerian economy, particularly money that has flown out as a result of tax evasion. And we would be briefing Mr president on specifics and I would be able to provide you with more detailed information when I have Mr President’s final and formal approval.
“The key attainments from this trip – we met with the World Bank and the country team as a group and one of the discussions was that there was an unacceptable low level of disbursement of funds on Nigerian projects.
“Indeed, the rate is 13 per cent at the moment which is unacceptably low. We agreed on a number of measures to reverse this, and these include, we would review process of originating projects, project designs and implementation issues to understand why certain projects are performing at such a low rate. We would consider restructuring, reallocating or even canceling irredeemable project components. We would strengthen our implementation capacity including our capacity for monitoring and evaluation.
Continuing, she said: “We would have regular monthly meetings now with the World Bank Group and there would be regular briefings of Federal Executive Council and the National Economic Council on the performance of Nigeria’s portfolios. And that’s because some of these projects are at state governments’ level.
“So its very important to bring to the attention of the governors failing World Bank projects in their states so that we can actually access this money which ofcourse is concessional money and is aligned to our development goals. We believe it is unacceptable that Nigeria should be drawing down on such a low rate especially at time like this when we really need these investments.”
In addition, she said the federal government has made counterpart funding on the $500 million irrigation project covering Bakalori, Kano River and Hadeja valley, which would enable the immediate take-off of the project, adding that agreement was also reached to expedite action for the take-of the $500 million North-east social safety net project.
Responding to a question, Adeosun dismissed the insinuation that there was lack of harmony between the central bank and the ministry of finance, saying that both agencies are always working for the greater benefit of the economy.
“For the foreign loans, we are through with the AfDB, ready to go to the Eurobond. It is just to appoint the parties. It is particularly the issue of pricing, not the volume. We are going to look into how we can refinance some of our existing Naira debt into the international market to take advantage of the low international rate now.
“This would less the pressure on the domestic market. We have spoken with a lot of lenders and the market is really very attractive now. The Eurobond issue is an issue of pricing, not volume, but on the top of that and back to the issue that I talked on interest rates, we are going to look at how we can refinance some of our existing naira debt into the international market, to take advantage of the fact that there are negative interest rates in a lot of markets, and we think we can significantly lower our cost of funds,” she said.
On his part, Emefiele said meetings were held with some group of foreign investors who have shown interest in coming in to Nigeria.
“Like I always say, the flexible exchange rate policy is not cast in stone. We can always go back and look at them. But we will make sure that they are policies that are done in the interest of Nigeria as well as Nigerians because that is what is important to us is how do we protect Nigerians, what do we do to ensure that we reduce the level of unemployment what do we do to ensure that manufacturers continue to improve their industrial capacities, how do we make it possible them to get foreign exchange for them to run their actories so that prices can be moderated at the level that the purchasing power of our people don’t look totally eroded.
“Like I said, the flexible exchange rate regime document that we have in place is a very sound document and truly speaking, I have not seen one person that has criticised the document,” Emefiele added.
Responding to a question by THISDAY on contingency measures being put in place to protect the banking system in view of the weak global economic environment, Emefiele pointed out that the central bank was closely monitoring the banks as part of its function.
“But I must say that for the Nigerian banking environment, it is not as bad as people may think, given that we have strong prudential guidelines and ratios in place. I think we can only continue to strenghten the banks by putti