Bank CEO Seeks Support for Nigeria’s Import Substitution Strategies

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Obinna Chima

The Managing Director/Chief Executive Officer of Rand Merchant Bank (RMB) Nigeria and Regional Head, RMB West Africa, Mr. Michael Larbie has called on bank customers and investors in Nigeria to support the federal government import substitution and backward integration policies.

Larbie said this during an interview on the sidelines of an event organised by the bank to appreciate its clients for their support in the outgoing year. He urged clients to take advantage of the federal government policies of the support of the financial institution’s support.

“We think the increased focus on the import substitution strategies and backward integration of the federal government are important and should be supported. As an organisation, we are ready and willing to support clients that embrace that. 2016 has been a challenging year obviously with Nigeria falling back into a recession.

“We had to contend with foreign exchange (FX) shortages, inflation has been on the rise and as result we have experienced negative real interest rate. So, in summary, 2016 has been a very challenging year. As a result, it has impacted the broader economy and our clients in general,” he explained.

Larbie disclosed that clients are increasingly beginning to take naira loans rather than foreign currency loans due to the FX scarcity.

The bank CEO urged investors to adopt long-term investment strategies because of the seeming uncertainties in the economy.

Larbie said the slowdown in the economy also affected the performance of his institution.
He added: “Clients are increasingly beginning to take naira loans, whereas they would have taken dollar loans. So, we did take advantage and we did benefit from that. The FX strategy impacted some of our manufacturing clients who had to operate at less than their desired capacity as a result of the lack of FX for raw materials. Some had to ration their raw materials so as not to shutdown their plants. So, that summarizes 2016. Again, we want to put that behind us and look forward to 2017.

“In 2017, there certainly would be a few things that we are looking out for. Firstly, I described 2016 as a challenging year, but it is also a transition year for the new government. So if you think about when the new government was put in place in terms of the cabinet and when the budget was approved, we really didn’t have a full year of budget implementation. So, that did not help the economy as much, coupled with low crude oil prices. Also, the reduced crude oil production volume had its impact.

“Obviously, going into 2017, we hope that the appreciation in crude oil price continues with OPEC agreeing to cut production, we expect that oil prices would go up. We expect that the 2017 budget would be passed into law, a lot more expeditiously so as to expand economic activities. I also hope that we would find a more transparent FX regime which engenders inflows of foreign exchange into the country so as to reduce the pressure on the CBN as the only supplier of FX in the market.”

In addition, he anticipated that the likelihood of a late implementation of the 2016 budget would roll into 2017 and may be implemented alongside the 2017 budget. This, in his expectation would help boost economic activities.
“2017 budget appears to be an expansionary budget, which is the right thing to do. Government is a big player in the economy and where it is failing; definitely it is going to affect overall performance. So we do hope that budget implementation effectively rolls through to 2017 until the new begins. The expansionary budget is the right thing to do to stimulate the economy and put it back on track.

“The import substitution strategy through diversification is the right thing to do now. We must question the rationale to depend on oil for years,” he added.