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Banking Industry Still Exposed to High Credit Risk – NDIC

The Nigerian Deposit Insurance Corporation (NDIC)  has disclosed that the banking industry remains   exposed to high credit risk as depicted by the high Non Performing Loans (NPLs) ratio of 11.70% as at 31st December, 2018.

This, the Corporation said, exceeded the maximum prudential threshold of 5%.

But the disclosure which was contained in the 2018 annual report of the corporation hosted in its website yesterday also indicates that it is still  an improvement when compared with NPLs ratio of 14.84% recorded as at 31st December, 2017.

The report further  highlighted that  the banking  industry NPLs decreased by 25.15% to ₦1.79 trillion in 2018 from ₦2.36trn in 2017. In the same vein, the NPLs to Shareholders’ Fund Ratio improved from 69.21% in 2017 to 57.50% in 2018.

The banking industry average Capital Adequacy Ratio (CAR) increased to 15.26% as at 31st December, 2018 from 10.23% as at 31st December, 2017, above the regulatory minimum of 10% and 15% for banks with national and international authorisation, respectively.

The increase in the CAR could be explained by the 44.88% increase in the total qualifying capital from ₦2,201.58 billion in 2017 to ₦3,189.55 billion in 2018 and complemented by the 2.89% decline in the Total Risk-Weighted Assets from ₦21,520.82 billion in 2017 to ₦20,898.71 billion in 2018.

The recapitalisation requirements declined from ₦1.57 trillion in 2017 to ₦704.88 billion as at 31st December, 2018. The banking industry unaudited profit before tax (PBT) significantly rose from ₦150 billion in 2017 to ₦310 billion in 2018. That could be attributed to a reduction in operating expenses by 25% from ₦440 billion in 2017 to ₦330 billion in 2018.

The Yield on Earning Assets increased from 2.62% as at 31st December, 2017 to 3.23% as at 31st December, 2018. Similarly, Return on Assets (ROA) rose to 0.88% as at 31st December, 2018 from 0.48% recorded as at 31st December, 2017.

Also, Return on Equity (ROE) increased from 4.70% as at 31st December, 2017 to 9.73% as at 31st December, 2018. A breakdown of the report showed that the total credit extended by the deposit Money banks (DMBs) to the domestic economy amounted to ₦15.29 trillion in 2018, representing a 3.90% decrease from the ₦15.91 trillion recorded 10 in 2017.

Source: dailytrust

Ghana’s $24m Investment in Scanners, Automation Technology Holds Lessons for Nigerian Ports

As Nigeria continues to carry out manual inspection of containers and other imports at the nation’s seaports, Meridian Ports Services (MPS), operator of the newly built Terminal 3 of Ghana’s Tema Port, has invested over $24 million in acquisition of Customs inspection infrastructure and superstructure, popularly known as scanning machines.

With this development, Ghana’s port has overtaken Nigeria in running of a digitalised port system as Nigeria Customs currently carries out 100 percent physical and manual examination of containers, six years after the expiration of the Destination Inspection (DI) contract formerly handled by private companies that provided scanning services at the ports.

By implication, over 500,000 twenty-foot equivalent units (TEUs) of containers and about 71,535,636 million metric tonnes of general cargo, dry and bulk cargoes that come to Nigerian ports annually are manually inspected by the officers of the Nigeria Customs.
Meanwhile, the newly launched MPS Terminal 3 at Tema Port has the latest scanning technology installed in the port terminal, which is expected to facilitate the smooth movement of trade in and out of the port.

Dorothy Arhin, head of Ghanaian Customs Unit, said building of import scanner has transformed and added value to the role of Customs in cargo handling at Tema Port.

She described the new technology as a game changer to the Customs processes and cargo clearing procedure, which she said would bring better transparency.

 

Recall that in line with the port reform agenda of 2006, the Federal Government entered into contract with Scanning Service Providers (SSPs) including Cotecna, SGS and Global Scan, responsible for approving Form M, issuing Risk Assessment Report (RAR) and scanning goods imported into Nigeria.

The contract, which was based on build, operate, own and transfer (BOOT) regime, allowed the DI agents to acquire multi-billion dollar mobile and fixed scanners for electronic examination of imports at the ports and border stations allocated to them.

Six years after the DI agents handed over the equipment to Customs to manage, cargoes now dwell between one and two months in Nigerian ports and the importers pay demurrage and storage charges for the delay.

“Today, scanning machines are no longer functional in Nigerian ports and border stations. Congestion is building in the ports because the goods are not being cleared as they should,” said Tony Anakebe, managing director, Gold Link Investment Ltd, a Lagos-based clearing and forwarding company, in an interview with BusinessDay.

Anakebe said the importer pays demurrage and storage charges to shipping companies and terminal operators, which adds to the cost of doing business, and ends up shifting the cost to the end consumers by raising the market prices of commodities.

He said Nigeria Customs needs to learn from the digital transformation that recently took place in Tema Port of Ghana to change the nation’s manual cargo inspection procedure and ameliorate the plight of Nigerian importers.

Meanwhile, Mohamed Samara, chief executive officer of MPS Terminal 3, said recently that the new technology is expected to eliminate Customs’ revenue leakages and supplement domestic revenue.

“The new setup provides Authorities with audit trail of all receipt and delivery movements in the port,” Samara said.

This means Nigeria can generate more money from Customs through blocking leakages and creating businesses for firms that import goods.

MPS Terminal 3 also has connected gate technologies comprising Licence Plate Recognition (LPR) for reading vehicle’s number plate, Optical Character Recognition (OCR) for recognising container numbers, integrated weighbridges, and Radio Frequency Identification (RFID) which identifies trucks that use the terminal.

“Driver access to the terminal is controlled using Biometric Access Control and drive-through Smiths Detection scanning portals that automatically inspect trucks, containers and other vehicles, for explosives, drugs and weapons,” Samara said.

BusinessDay understands that in Nigerian ports, vehicles especially trucks are still being inspected manually as the government is yet to introduce the electronic gate (e-gate) inspection machine.

“Inspection of trucks manually in our ports sometimes creates long queue at the port gate which, at peak periods, creates serious congestion and delay for truckers and the cargo owners,” said Jonathan Nicol, president, Shippers Association of Lagos State.

MPS Terminal also uses a Truck Appointment System (TAS) and call-up system that allow freight forwarders to pre-book appointments before accessing the port, a system Nigeria is currently struggling to install in Apapa and Tin-Can Ports.

This is fully integrated with the Terminal Operating System (TOS) to provide process automation for drivers, eliminate congestion and maximise efficiency levels without compromising security at the port.

Findings have shown that absence of call-up system has been the major reason Apapa gridlock has persisted over the last seven years as truckers indiscriminately queue on the roads leading to the port in a quest to access the port to either drop empty containers or pick laden goods.

Remi Ogungbemi, chairman, Association of Maritime Truck Owners (AMARTO), told BusinessDay that congestion on Apapa roads could be addressed using effective call-up system that gives truckers appointment on when to come to the port to do business.

“Though the NPA has tried to introduce a manual call-up system, we need to have an electronic call-up, which the authority promised to set up in August, to help organised truck movement within the port environs,” he said.Mersin escort.

Source: businessdayng

AfDB to Governments: Focus on job Creation, not GDP Numbers

The African Development Bank (AfDB) has advised African governments to focus on creating jobs for the youth instead of being concerned about GDP growth figures.

Speaking on Saturday on a panel at the 2019 Tony Elumelu Foundation Entrepreneurship Forum, Akinwumi Adesina, the AfDB president, proposed the establishment of a Youth Entrepreneurship Investment Bank.

This initiative, he said, will focus 100% on providing funding for start-ups, small and medium enterprises across Africa.

He said while it was good to focus on how to grow the GDP, the emphasis should be on economic growth that could create quality jobs for the people.

Adesina, who is Nigeria’s one-time minister of agriculture, cautioned financial institutions to stop citing risk as a reason for restricting access to entrepreneurship funding, advising them to come up with safeguards to mitigate the risks.

“Its time for African leaders to shift from youth empowerment to youth investment,” he said.

“We need to set up Youth Entrepreneurship Investment Bank. This bank needs to unlock the entrepreneurial initiative in our youths by looking at assets and not risks,” he said.

In his address, Benedict Oramah, the president of the African Export-Import Bank, Prof. Benedict Oramah, charged young entrepreneurs to be more daring and not be afraid to take risks in their businesses.

He urged them to never let the infrastructure deficit in most countries on the continent hinder them from being successful in their chosen enterprises.

Source: thecable

Nigeria’s GDP can hit $1.5trn with new national carrier – Sirika

Nigeria’s Gross Domestic Product (GDP) could hit over $1.5 trillion if the new national carrier is fully operational.

Former minister of State for Aviation, Hadi Sirika, stated this during his ministerial screening in Abuja on Thursday.

Speaking to journalists after his ministerial screening, he promised to pursue the proposed national carrier to a logical conclusion if reassigned the portfolio by President Muhammadu Buhari in his second term in office.

In September 2018, the Federal Government had suspended the new national carrier, Nigeria Air, amid controversial circumstances.

The Federal Government is expected to own a maximum of 5 percent shares in the venture.

Sirika said: “I believe having a very vibrant private sector led national carrier is good for the economy of Nigeria, it is good for the population of Nigeria, it’s good for the centrality of Nigeria, it is good for the wealth and fortune of Nigeria.

“One aeroplane in Nigeria is equal to 300 direct jobs to start with. The relationship between GDP and air transportation is direct and we have the biggest GDP in Africa.

“By the US estimation we are a trillion dollar GDP, by official figures of the NBS, we are half a trillion dollar GDP. All those that are not included like the barber shop, like the ‘akara’ shop and so is considered we might be hitting more than $1.5 trillion GDP, we are 200 million people that will grow more than 400 million people in 2030.

“We are the centre, eco-distant to all locations in Africa, we are at the centre of the world we are highly mobile travelling people and this is why the prices of tickets are so expensive because we dont have alternative, we cannot match them, whatever they give we have to take. Its market, it is capitalism, we can run away from it, I think it is important.

“If it is me or whoever is the minister, I think that this is a priority we will take, thank God a lot of job has been done”.

Source: businessday

Kenya example exposes weakness in Nigeria’s move to force bank lending – S&P

Forcing banks to lend backfired in Kenya and may be an indication that Nigeria’s latest lending directives to local banks may flounder, according to international ratings agency, S & P Global.

In August 2016, the Kenyan government imposed a contentious banking law that capped what lenders can charge consumers for loans at 4 percentage points above the central bank rate.

The policy was to fulfill an election-campaign pledge by President Uhuru Kenyatta to improve lending terms for consumers, against the advice of the central bank and the National Treasury.

The policy cut into lenders’ profit margins, forcing them to be more selective in who they provide money to. That caused credit growth to shrink as Kenyan banks grew risk averse.

Growth in credit to the private-sector averaged 2.4 percent in 2017 and 2018, compared with average annual expansion of 20 percent in the decade before the law came into effect, according to the Kenyan central bank data.

As the negative impact of the lending cap worsened, a Kenyan court suspended its implementation in March 2019, calling the legislation “vague, imprecise, ambiguous and indefinite.”

It is based on the impact of trying to force banks to boost lending to specific sectors in Kenya that analysts are skeptical about Nigeria’s latest approach to force banks to lend to small businesses in specific sectors.

“In our view, the CBN’s lending measures will not work and what the Kenyan government tried to do in 2016 could be seen as proof,” said Samira Mensah, director financial services ratings, S&P Global ratings.

“Forceful lending didn’t work in Kenya because the banks were not able to price risk and the same scenario could play out in Nigeria,” Mensah, who was speaking at the S & P Global’s annual Nigeria conference, said.

The Central Bank of Nigeria (CBN) this month introduced new lending measures to stimulate credit growth in an economy still reeling from a contraction in 2016.

The CBN ordered the deposit money banks to lend at least 60 percent of their deposits to small businesses.

They have till September 30 to implement the measure and failure to do so comes with a penalty of forfeiting more cash to zero-interest regulatory reserves.

The current average of banks’ loan to deposit ratio is 54 percent.

The CBN followed the loan to deposit directive by introducing a measure that cut how much money lenders can keep in interest-bearing accounts with the apex bank by 73 percent.

There has been major sell-offs on some of the country’s biggest banks since the announcement of the new measures. Stocks of Guaranty Trust bank, the largest bank by market value and Zenith Bank, the second largest bank by assets, both fell to a 52-week low.

International ratings agency, Moody’s, also thinks the CBN’s directive regarding interest payment on bank deposits is unlikely to force banks to grow their lending “aggressively.”

“Already, banks were only remunerated up-to NGN7.5 billion, and any amount above N7.5 billion was not remunerated,” Peter Mushangwe, a banking analyst at Moody’s said in an exclusive comment to Business Day.

The CBN is also said to be exploring mechanisms that would limit how much the banks can invest in government securities, which has been the biggest distraction for lenders who have been willing to lend to government for double digit return since 2016, rather than gamble on private lending in a risk-laden economy.

Yields on government securities have averaged 15 percent since 2016, allowing banks make some profit even though their loan books shrank.

Treasury bill yields have since cooled to around 12 percent after the government cut back on domestic borrowing in favour of foreign debt to manage its interest payment costs.

However, at 12 percent, banks are still piling cash into one of the highest returning government securities in emerging markets.

The impact of Nigerian banks’ risk averseness has been telling on the economy which has not grown fast enough to create new jobs for burgeoning population.

The economy grew 2 percent in the first quarter of 2019, and has moved below population growth since 2016, causing GDP per capita to shrink for three years straight.

Mensah believes weak bank lending is reflective of slow economic growth.

Source: businessday

Hot Housing Market has Fueled Economic Expansion—and Inequality

The unprecedented economic expansion currently taking place in the United States, which just reached a record-setting 121st straight month, has had significant impacts on real estate development and urban growth across the country.

It’s taking place during parallel growth in the housing market, according to a new report by the real estate analysts at CoreLogic, a business intelligence firm. “The Role of Housing in the Longest Economic Expansion” examined just how much the overall economy has been tied to a turnaround in the national housing market, a decade-long recovery from June 2009, described by analysts as the “trough of the Great Recession.”

Housing comprises approximately 15 percent of the country’s GDP, and while its benefits haven’t spread to all income levels, it has been intertwined with the nation’s overall financial fortunes over the last decade.

“During the last nine years, the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence,” says Frank Nothaft, CoReLogic’s Chief Economist. “The longest stretch of mortgage rates below 5 percent in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices and home equity wealth.”

Reinforcing the value of homeownership

The amount of appreciation and wealth tied up in homeownership suggests that it’s just one of the many factors deepening divides in the U.S. economy at large.

From June 2009 to May 2019, home prices increased 50 percent, providing sellers with significant returns. At the same time rents for single-family homes, a growing portion of the home market, increased 33 percent, squeezing renters, many of whom are unable to achieve homeownership.

CoreLogic found that total home equity value nearly tripled from the first quarter in 2009 to the first quarter in 2019, rising from $6.1 trillion to $15.8 trillion. The average equity per borrower rose from $75,000 to $171,000 over the same period of time.

But not everybody has been able to cash in on these rising prices. Between Q3 2009 and Q4 2012, the number of owner households decreased 2.7 million while renter households rose by 12.9 million. CoreLogic found that the foreclosure crisis pushed former owners into rental housing, while first-time buyers delayed entering the home market. Between Q3 2014 and Q2 2015, there was additional big shift towards renting, with homeowner households decreasing by 1.1 million and renters jumping by 7.5 million.

These shifts meant that millions weren’t able to take advantage of significant home price appreciation; between 2012 and 2019, home values in states across the country showed positive growth ever year. In 2013 and 2014, in the midst of these shifts away from homeownership, home prices in California increased 18 and 10.8 percent, respectively, concentrating the rising value of the housing market in fewer hands.

Runway for recovery

The steep fall home values took in the aftermath of the Great Recession provided plenty of opportunity for the market to bounce back. CoreLogic found that the crash caused a huge hit in the company’s Home Price Index (HPITM), a broad measurement of prices across the nation. Between April 2006 and March 2011, the measurement dropped by a third.

The housing bust caused homeowners across the nation to see the value of their property decline precipitously, with many seeing their home’s value temporarily sink below its purchase price. In 2010, 25.9 percent of homes across the country showed negative equity. Today, just 4.1 percent of homes are underwater, and homes across the nation are once more serving as engines of wealth generation.

Part of this significant wealth appreciation came from speculation within a steadily rising market. In the first quarter of 2018, the recent high point in flipping activity, 11.4 percent of homes were bought and sold within a two-year period. In addition, supply constraints drove up prices, including steady increases in material and labor costs. Prices sit at record highs in many markets, which struggle with increasing unaffordability, though CoreLogic doesn’t believe that means most homes are overvalued. The company found that in May 2019, just 32.4% of the 392 metro areas analyzed were overvalued; compare that to the bubble of September 2006, where a similar analysis found that 70.2 percent of those markets were overvalued.

Is another recession around the corner?

Should owners be afraid of a lurking recession? CoreLogic says that while many economists have pointed to stock market stumbles as a sign of an imminent slowdown, the housing market is healthy, albeit losing some of its momentum.

Home price increases appear to be leveling off at the national level, rising just 3.6 percent year-over-year thus far in 2019. With mortgage rates at a two-year low and overall mortgage delinquency rate achieving a record low in April 2019 of 3.6 percent, there aren’t bubbles or warning signs on the housing market horizon.

“We expect the housing market to enter a normalcy phase over the next 24 months,” says Ralph McLaughlin, CoreLogic’s deputy chief economist. “With prices neither rising too fast nor too slow, and with a growing stream of young households looking to buy homes over the next two decades, the long-term view looks healthy.”

CoreLogic HPI Forecast expects a moderate, 5.6 percent acceleration in annual home price growth from June 2019 to June 2020. According to Molly Boesel, CoreLogic’s principal economist, there’s even enough value in homes to help homeowners weather the next downturn. Now, it just appears to be a question of helping more Americans take advantage of a much healthier market.

Source: curbed

Green Architecture and Sustainable Economic Growth in Nigeria

You don’t need a green roof, a vertical garden or a green wall to live in a green building.

Climate change will not destroy the earth. The planet will go on for millions of years, long after human life has expired but climate change, however, can destroy the species of life on earth that cannot adapt fast enough to new and changing conditions.

This entire process of building design that reduces the harmful effects on our health and environment is known as green architecture or green design. Green architecture is a sustainable practice of green building design which is designed and constructed with keeping the environmental standards in mind.

Today, we find ourselves at a crossroad on making choices about architectural standards, building materials and new construction, along with the operation and maintenance of buildings, account for a considerable sum of the total greenhouse gas emissions.

Knowing this reality, architects are supposed to carry the responsibility of building properties without deteriorating the planet’s environmental structure or depleting its resources any further. Sustainably designed buildings aim to lessen the impact of greenhouse emissions on our environment through energy and resource efficiency.

Sustainability presents itself as a unique challenge in the field of architecture construction projects typically consume large amounts of materials, produce tons of waste, and often involve weighing the preservation of buildings that have historical significance against the desire for the development of newer, more modern designs.

Increasing CO2 emissions are believed to result in irreversible changes in the global climate and the global environment, the consequences of which are hard to predict, but which are believed to impose tremendous economic cost of mitigation and adaptation, if not catastrophic effects on the human future.

Green Homes illustrates the multiple environmental, economic and social benefits arising from a transition towards energy-efficient housing. It outlines the required institutional changes and provides some basic principles for successful policies.

For a world aiming towards a balanced and inclusive green economy for sustainable development, Green Homes is more relevant than ever today. In spite of the sustainability and affordability benefits of Green Houses, the progress made by Nigerians and the Nigerian government is so little compared to advanced nations where Green Houses and allied concepts are very popular.

The concept of Green Houses has become very significant just as the waves of green movement are sweeping across the world. Apart from benefits that such houses promise to the environment, they are cost-effective and would lead to a more sustainable economy.

Source: Legit.ng

Experts Canvass Infrastructure Finance Through Capital Market

Financial experts have underscored the need for government to work out modalities on how to boost investment in infrastructure through the creation of activities that will engender effective long-term funds from the nation’s bourse and attract foreign direct investment (FDI) into Nigeria.

The experts, who spoke at the public presentation of a book titled; ‘Frontier Capital Markets And Investment Banking: Principles and Practice from Nigeria,’ in Lagos, on Tuesday, argued that the kind of capital that currently exists in Nigeria is more like ‘hot money’, which are not appropriate for economic development.

Hot money is the flow of funds (or capital) from one country to another to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called ‘hot money’ because they can move very quickly in and out of markets, potentially leading to market instability

According to them, Nigeria is currently in need of FDIs as well as long term funds to grow the real sector, and accelerate infrastructure development across the priority sectors of the economy.

Furthermore, they submitted that efforts at attracting FDI to grow the economy may not yield the expected results unless government and relevant agencies create strong legal policies and frameworks.

Specifically, the Director, Centre for Economic, Policy, and Research, University of Lagos, Prof. Ndubuisi Nwokeoma, urged government needed to focus more on the capital market where long term fund can be raised to finance infrastructure and other capital projects.

Nwokeoma said: “The kind of capital that we have in Nigeria currently is more like a portfolio, which is like hot money. Hot money is not good for the development of the economy. For the economy to grow we need FDIs, we need to invest and attract long term funds so that we can grow the real sector, without which the economy cannot experience meaningful growth.”

He added that the book is topical, as it emphasizes the need “to revive the principles and practices of investment banking in market operations, to enhance the growth of investment funds.”

Also speaking, Prof. Konyi Ajayi, said there is a need to improve the legal framework to attract huge investment in frontier markets. He argued that “The law has not caught up with market realities, and market reality is one of creative disruption. We have new forms of money that are coming and coming very fast. The nature of business is changing, we must do all we can to help industrialization in the country, help made in Nigeria. The reality is that there are new ways of doing things, and therefore there must be new ways of financing, so the law needs a lot to do.”

Also contributing, the Managing Director of Vetiva Capital, Chuka Eseka, said Nigeria needs to deepen access to financial markets to drive infrastructural development.

“The book also explores capital raising through debt underwriting and private equities with details on the workings of mergers and acquisitions, infrastructure, projects, and real estate financing within the framework of securities brokerage, asset and pension management. It concluded by saying that the five ingredients to development are essentially institutions, incentives, inclusiveness, innovations, and investment,” he said.

Source: guardianng

US to establish West African Trade Hub in Nigeria

Representatives of the US government say plans are underway to establish the West African Trade Hub (WATH) in Lagos and Abuja, Nigeria.

This is in a bid to support the bilateral trade between Nigeria and the United States.

Grace Adeyemo, director of the Nigeria-American Chamber of Commerce (NACC), said this at a conference for Prosper Africa, an initiative of the US government targeted at “creating an enabling environment for foreign and direct investment” in African countries.

Adeyemo expressed optimism about the economic prospects of the President Donald Trump-backed trade initiative, which, according to her, prompted the decision to move the trade hub into Nigeria.

She, however, noted that Nigerian entrepreneurs who seek access to opportunities that would accrue from the initiative through the hub would need to meet the regulatory standards required to break into the US/global market.

According to her, the NACC would also offer advice to prospective exporters who would like to take advantage of the tariff-free market on the US-Nigeria bilateral trade agreement.

“US representatives have told us that the West African Trade hub would now move into Nigeria to be situated in Abuja and Lagos. This is so that we can address our challenges and have the hub serve as an overseer reciprocatory for all we’re going to be doing in the US,” she said.

“It will be launched anytime soon. It has always been in Ghana. US government is willing to support a partnership between US investors and Africa. Nigeria can latch onto that but we need to get it right first. We need to try to grow our businesses and add value to them.”

WHAT IS THE WEST AFRICA TRADE AND INVESTMENT HUB?

WATH is a one-stop shop organization backed and funded by the United States Agency for International Development (USAID) to increase the value and volume of West Africa’s exports by addressing challenges in intra-regional and export-oriented products.

Apart from synergizing with local regulatory agencies and policymakers to influence the business environment and attract investors, it is also targeted at promoting the two-way trade between Africa and the US under the African Growth and Opportunity Act (AGOA).

AGOA is a US policy that accords duty-free treatments to virtually all products that are exported to the US by beneficiary sub-Sahara African countries. Acclaimed as the cornerstone of US trade policy with Africa, it is aimed at facilitating the export of over 6,000 goods with no tariff.

WHAT IS THE PROSPER AFRICA INITIATIVE?

Prosper Africa, a trade initiative launched by the Trump’s administration, is one aimed at synchronizing the efforts of the US government agencies to facilitate more deals between the US and African businesses and address trade/investment barriers.

Earl Gast, executive vice president of programs at Creative Associates International, said the end-result of the initiative would create more jobs for Nigerians. He said it would significantly grow the economies of both countries and improve the export capacity of Nigerian businesses.

“With Africa’s prosperity should come the US’ prosperity. We’re looking at how we can marry up the private sectors of both countries and, in the context of Nigeria, partner with the US capital; knowhow; and exports,” he said.

“Economies would grow, jobs would be created through private sector development. Nigeria would export into the region, through AGOA strategy, and to the US. We’re also looking at US exports that might help grow companies in Nigeria so that they can take advantage of the US market.”

On her part, Florie Liser, CEO of the Corporate Council on Africa (CCA), said the initiative would support US firms that intend on investing in Africa and develop the value of Nigerian products to enable the private sector benefit substantially from the value chain.

“Now Prosper Africa is focused on incentivizing and facilitating US investments into Africa in key sectors, whatever they may be. Agro-business is one of them. But there are others: health, ICT, infrastructure and places where the US government can bring value in terms of products and services,” she said.

“The reason that Africa accounts for only 3 percent of world trade today, notwithstanding that they have so many resources they sell the world, is because they are always on the lowest end of every value chain. You ship raw products while somebody else processes it into something that has more value.

“As long as that stays that way, Africa wouldn’t be able to benefit much from global trade. Why shouldn’t Africa ship its value-added products instead of raw products? The focus of the initiative is going to be on the investment into productive capacity that adds value.”

Source: thecable

India’s LPG model offers solution to Nigeria’s liquidity, growth crisis

Nigeria’s finances are in a precarious state and unless there is adequate liquidity for the government and the private sector, the country will continue to remain fragile to external shocks.

Since the collapse in global oil prices, Africa’s largest economy has seen actual revenues dwarf projected revenues, which has made the government resort to taking on huge external borrowings to meet its expenditure obligations.

However, if there are countries in the world that have successfully scaled through similar situations as Nigeria, India, the world’s most populous nation after China, is a sure example to learn from. Reforms the nation enacted some 30 years ago helped it attract sufficient investments, reduce unemployment and lift well over 370 million of its populace out of poverty.

In the late 90s, the Indian government flagged off economic policy reforms in the business, manufacturing and financial services industries, targeted at boosting economic growth.
The reform was a model referred to as Liberalisation, Privatisation and Globalisation (LPG). The major aim of the LPG model was to slacken government regulations hurting the growth of investment in the country, transferring of state-owned assets and positioning the country for consolidation among various economies of the world.

With these reforms, the Indian economy grew the overall amount of overseas investment to $5.3 billion in four years from a microscopic $132 million in 1992. Today, the country is ranked the second-highest destination for investment in the world, according to data from the United Nations Conference on Trade and Development (UNCTAD).

For Africa’s most populous nation, the government has over time complained of a shortfall in revenue even though it currently sits on idle assets scattered around the country.

Nigeria has dead capital that is worth as much as N900 billion majorly in the real estate and agricultural sector, according to estimates done by global consulting firm, PricewaterhouseCoopers. The country got about $23 billion in remittances in 2018, and a dismal amount of Foreign Direct Investments (FDI), compared to peers. It also has low levels of external liquidity (compared to the size of its economy) in the form of foreign reserves.

“By unlocking idle assets, improving remittances and making the environment more attractive for FDIs, the government can create the needed liquidity that is required for economic growth,” Ayo Teriba, chief executive officer, Economic Associates, said.

“Going to FDIs puts you in the driver’s seat. Egypt unified its exchange rates and boosted its supply of liquidity. As for remittances, if you can’t embrace your non-residents to send money home, how do you attract foreign investors? We need to move up the remittances and FDI table to join the likes of India and China,” he said.

Teriba added that Nigeria could securitise (not sell) its financial assets (such as LNG/oil JV equity stakes) to get more liquidity, privatise brownfield assets and liberalise other sectors of its economy like rail, for investors to pump money into, leading to increased overall liquidity in the economy.

According to Teriba, if there is no liquidity in the system, there won’t be stability; ease of doing business in a country would be threatened; growth would be slow; infrastructural deficit would widen; diversification agenda can never be achieved; unemployment would skyrocket and the well-being of the populace would continuously diminish.

Nigeria’s postal service currently has about 2,000 buildings in prime locations around the country, BusinessDay investigation shows. Nigeria also has a total of 2,000 police stations and 235 prisons all located in commercial locations across the country.

Teriba argued that the government could securitise or commercialise these assets by opening equity investments as these would attract more external liquidity and help the country in building buffers.

Data compiled by BusinessDay show that Nigeria is the most domestic illiquid country across Africa. In 2017, the total money available in circulation as a percent of Gross Domestic Product (GDP) stood at 19.5 percent.

This figure represents an abysmal amount when compared with peers around the continent. For Africa’s most industrialised economy (South Africa), money supply as a percentage of GDP stood at 72.2 percent while Angola had 56.5 percent.

In a bid to encourage lending to the real sector, the Central Bank of Nigeria sent two clear options to banks. Either they lend 60 percent of their deposits or they would be forced to pack a higher amount as cash reserves with the apex bank.

The CBN also reduced the amount which deposit money banks can keep with the CBN to yield overnight interest by 73 percent to N2 billion from as high as N7.5 billion.

Ever since the apex bank released the guideline, stocks of Nigeria’s biggest banks have taken a beating, making investors worry about the apex bank’s next line of action.

Teriba argued that there is a clear positive correlation between a country’s external liquidity and the money available in its domestic economy.

“When external liquidity increases, the country becomes stronger to withstand shocks, which would make the exchange rate stable and invariably, increase liquidity in the domestic market,” he said.

He noted that the CBN should focus on increasing external liquidity rather than force the banks to lend when there is no sufficient liquidity in the system.

By LOLADE AKINMURELE, BALA AUGIE, MICHAEL ANI & OLUFIKAYO OWOEYE

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