The Nigerian-British Chamber of Commerce (NBCC) has called on the Central Bank of Nigeria (CBN) to focus more on sustainable monetary policy that would drive infrastructural development, enhance tax compliance and ensure a favourable environment for the growth of small and medium enterprise (SME) businesses in the country.
The Chamber also urged the apex bank to adopt monetary policies that would boost capital inflows, encourage domestic lending and enhance production for export.
President of NBCC, Dapo Adelegan, who gave the advice while analysing the Chamber’s quarterly review of the Nigerian economy, identified decline in economic activities, increase in unemployment rate and high operating cost as some of the negative effects that emanated as a result of the restrictions earlier placed on foreign exchange.
Addressing foreign portfolio investment, Adelegan said the foreign inflow has dropped from N53.20 billion in April 2015 to N14.52 billion in April 2016. He noted that many investors had left the country due to foreign exchange restriction and economic downturn.
Adelegan however expressed optimism that the new foreign exchange policy adopted by the CBN would bring in more foreign funds as it has started attracting domestic capital to the equity market. He said the new guidelines would also attract foreign investors back to the country through foreign direct investment (FDI) and provide domestic companies with funding and expertise.
Speaking on the economic recovery and growth plan of the federal government, which addresses major structural deficiencies, Adelagan said: “The success of the plan lies on the ability of government to implement and executive these policies.”
He said the federal government must consider concessions of federal assets in order to attract private capital that would efficiently exploit these valuable assets that are currently lying unutilised. Private investment will also reduce the burden on the government to utilise moribund assets, Adelegan said.
He added that a holistic tax reform that would among other outcomes, increase the tax base by effectively absorbing the informal sector into the economy, was also imperative.
Speaking on the implications of foreign borrowing, which he said formed a significant portion of the federal government’s plan to plug the N2.3 trillion deficit in the proposed 2017 fiscal budget, the NBCC President said “it will place more pressure on Nigeria’s debt service burden which is already about 35 per cent, due to low government revenue.”
He insisted that the influx of FX capital would be essential in bolstering Nigeria’s foreign reserves, which he said, would in turn increase foreign investor’s sentiment on FX liquidity.
According to him, increased borrowing, further disruptions in oil production and failure to meet revenue targets, could result in credit rating downgrades.
He maintained that inflow of foreign capital, coupled with robust fiscal policy, would provide the much needed injection of capital to fund key capital projects that would boost economic recovery and growth.
The CBN, apex financial regulator in February, released a new foreign exchange policy to ease the difficulties encountered by Nigerians in obtaining funds for foreign exchange transactions.
Unveiling the new initiatives, the CBN Governor Godwin Emefiele said the apex bank would “henceforth be providing direct additional funding to banks to meet the needs of Nigerians for personal and business travel, medical needs, and school fees”.
The CBN said such retail transactions would be settled at a rate not exceeding 20 per cent above the interbank market rate.
Prior to the CBN’s latest FX measures, the volatility in the Nigerian FX market, following the collapse of oil prices two years ago, was a source of worry as the gap between the inter-bank foreign exchange and parallel market rates, continued to widen at an alarming rate. The naira at some point, fell to as low as N525/$1 at the black market segment.