•Analysts proffer measures to reverse foreign investments’ decline
By Obinna Chima in Lagos and James Emejo in Abuja
Banking sector’s credit to the private sector rose by N757 billion or 2.57 per cent to N30.189 trillion as of July 2020, compared with the N29.432 trillion it was at the end of June.
Latest money and credit statistics from the Central Bank of Nigeria (CBN), obtained on its website yesterday, also showed that net credit by banks to the government increased to N9.522 trillion as at the end of July, higher than the N8.862 trillion it was the previous month.
This is coming as analysts yesterday offered policy recommendations to assist the federal government in arresting the recent decline in foreign capital importation amidst the impact of the COVID-19 pandemic on the country.
The surge in lending to the private sector could be attributed to the central bank’s aggressive development finance as well as measures it introduced to cushion the effects of the COVID-19 pandemic on households and micro, small and medium scale enterprises, in which the banks are the participating financial institutions.
Also, the CBN report showed that narrow money supply (M1), which includes all physical monies such as coins and currency along with demand deposits and other assets held by the CBN increased to N12. 582 trillion as at July, up from the N12.239 trillion it recorded the previous month.
Quasi money, which is highly liquid assets other than cash that can be quickly converted, stood at N20.764 trillion in the review month, up from N20.212 trillion in June.
Also, currency-in-circulation increased in July to N2.396 trillion, compared with the N2.300 trillion it was the previous month.
Similarly, the data showed that currency outside banks stood at N2.002 trillion as of the review month, up from the N1.868 trillion it was the previous month.
In addition, demand deposits also climbed from N10.371 trillion the previous month to N10.580 trillion in the review month.
Also, while banks’ net foreign assets stood at N7.637 trillion as at the end of July, compared with the N7.577 trillion it was the previous month, the financial institution’s net domestic assets were N29.186 trillion in July, as against the N28.049 trillion it was the previous month.
Banks’ reserves also climbed to N11.026 trillion as at the end of July, from the N10.956 trillion it was at the end of June 2020.
The central bank’s data also showed that its Special Intervention Reserves stood at N317 billion as at July.
Analysts Proffer Measures to Reverse Decline in Foreign Investments
Analysts at the weekend recommended measures to assist the federal government in arresting the recent decline in foreign capital importation amidst the impact of the COVID-19 pandemic on the country.
Data released by the National Bureau of Statistics (NBS) over the weekend showed a contraction of 78 per cent in foreign investments in the country in the second quarter of the year (Q2 2020) compared with Q1 and by 79 per cent when compared with Q2 2019.
But speaking in separate interviews with THISDAY, analysts noted that the drastic fall in capital importation to $1.29 billion within the review period compared with $5.85 billion in the preceding quarter, could be reversed by developing the Micro Small and Medium Enterprises (MSMEs) sector and implementing the policy on the consumption of made-in-Nigeria goods and services.
They also urged the government to open up economic activities irrespective of the COVID-19 pandemic, hoping that the planned resumption of international flights could improve capital inflows.
The analysts emphasised the need to provide adequate infrastructure, including power and transportation system as well as improve the current security situation in the country.
Commenting on the development, the immediate past Director-General/Chief Executive, Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Dr. John Isemede, said it was high time government at the three tiers faced export and manpower development rather than resort to borrowing to fix the current challenge.
He said the government must also emphasise value addition and reduction in exports and set targets for the organised private sector and MDAs as well.
He said: “We must do away with speculative thinking leading to devaluation of the naira as another round of recession is looming. The only way to turn the tide is the development of our MSMEs, technical colleges to support local production and artisans…”
Also, commenting on the capital importation assessment in which only six states of the federation- Lagos, FCT, Anambra, Kano, Niger and Ogun- attracted capital inflow, a former Director-General, Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, said the availability of foreign currencies which is currently being addressed by the CBN would, however, spur capital inflows.
He underscored the need to address insecurity, adding that nobody would want to invest in a country with a high risk of death and killings.
Ekechukwu urged the government to provide solutions to the issues that had prompted the drop in foreign investments, namely the lockdown occasioned by the pandemic, which affected businesses as well as fears by investors not certain that they could repatriate their funds when the need arose following the temporary dearth of foreign currencies.
He said the impending recession in the country could have further discouraged potential investors.
On his part, Professor of Finance and Capital Markets at Nasarawa State University, Prof. Uche Uwaleke, blamed the pandemic for the downturn in investment inflows in Q2, stressing that the country needed to boost FDIs to help stem the rate of unemployment.
According to him, there’s a need to guarantee investors of an enabling environment and be seen to be continuously improving the ease of doing business in the country.
“Like bees are naturally attracted to honey; foreign investors rush to economies they consider welcoming. Aside from return on investment, they also consider the economic environment which is part of country risk assessment.
“This will also include the ease with which funds and profits can be repatriated as an unstable forex market discourages foreign investors. In this regard, the CBN should continue its current efforts aimed at improving liquidity in the forex market,” he stated.
Also commenting on the dismal performance in capital importation, Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, said the country required a long-term vision and stable political and economic environment to attract the foreign funding it needed.
He stressed the need for a unified FX rate, which he said would help in solving issues that constrained investment inflows.
According to him, capital flight is expected during times of economic turmoil as portfolio investors look to de-risk their investments.
“But also our foreign exchange regime has not helped either as portfolio investors have not been able to repatriate their funds and have faced huge losses due to devaluation.
“What we should be looking for is foreign direct investment, which is more long term and creates jobs and infrastructure rather than just portfolio investment which is more volatile,” he added.
An Associate Professor of Agricultural Economics at the University of Port Harcourt, Anthony Onoja, urged Nigeria to encourage FDI from diaspora investors as well as develop infrastructure to woo quality investors.
He said the government should improve access to credit facilities for both foreign and domestic investors.
Onoja also tasked the government to improve the security situation and accelerate the momentum of the fight against corruption as well as remove barriers to doing business in Nigeria.
He said: “At this period of the pandemic, when most markets are shut down, it is difficult to expect an increase in demand for Certificates of Capital Importation (CCI). Since the pandemic is easing off gradually in Nigeria, the markets need to be reopened so as to boost business activities especially the small and medium scale industries.”