The President, Manufacturers Association of Nigeria (MAN), Mr. Frank Jacobs, disclosed this in a phone chat with THISDAY on Thursday.
Similarly, the Nigerian National Petroleum Corporation (NNPC), in its financial and operations report for February, confirmed that it would in partnership with the CBN provide up to $200 million for oil marketers to enable them meet their fuel import allocations in the second quarter of this year.
This came as Vice-President Yemi Osinbajo said yesterday that the federal government was looking at ways to boost the real sector growth by reducing interest rates to single digit.
He equally decried the level of corruption under the immediate past administration, blaming some individuals for stealing the equivalent of half of the nation’s current foreign exchange reserves of $27 billion.
The vice-president made the remarks at The Nation’s Newspaper Economic Forum that took place in Lagos.
His statement came on the heels of concerns expressed by the Lagos Chamber of Commerce and Industry (LCCI) over the recent increase of the Monetary Policy Rate (MPR) from 11 per cent to 12 per cent and the Cash Reserve Ratio (CRR) from 20 per cent to 22.5 per cent by the central bank, stating that the move signalled a return to monetary tightening.
Also, the Bankers’ Committee yesterday resolved to continue to take steps to support efforts by the federal government to revamp the economy.
Speaking to THISDAY, the MAN president said in the last few days, his members across the country have reported increased forex allocation from the central bank and urged the CBN to continue along this path, adding that it would go a long way in resurrecting Nigeria’s ailing economy.
Jacobs said: “There has been increased allocation of forex to manufacturers in the last few weeks. I had a meeting with them (CBN) about a week ago and since then, our members have reported that there has been an improvement in allocation of forex to them.
“We are very happy with that because they (CBN) gave us the assurance and they kept to that.”
Also on other concerted efforts by government to reverse the economic slowdown, Osinbajo said President Muhammadu Buhari’s scheduled trip to China was targeted at tidying up the agreement on the funds the federal government would receive to commence the Lagos-Kano railway line as well as the Lagos-Calabar line.
He also assured participants at the economic forum that the federal government would ensure that capital expenditure in the 2016 Appropriation Bill rises from 15 per cent in 2015 to 30 per cent this year.
Furthermore, he said the federal government was looking at means to encourage local production and would ban some imports in the near future.
He added: “In the case of low interest rate lending to the real sector, this has remained a major problem for many in the real sector, especially those in the agricultural sector, because of the bank lending rates of over 25 per cent in some cases.
“In order to promote agriculture and diversify properly and support industry, there is no question that we need to be moving towards a single digit interest rate. The plan is to move towards the single digit interest rate.
“In terms of diversification, the way forward requires that we move from reliance on crude oil to the production of petroleum products. By this I mean instead of merely extracting and exporting crude oil, Nigeria must now take full advantage of its petroleum sector and its entire value chain.
“It would also require making full use of our natural gas resources domestically and abroad and of course it requires that we fully implement laws and regulations in the oil sector so as to fully utilise its abundant forward and backward leakages.
“It is for this reason that the federal government would be prioritising the adoption and execution of the national oil and gas master plan this year.”
On efforts to ensure that the country becomes self-reliant, the vice-president said: “In order to diversify especially in the area of agriculture, we are planning to achieve self-sufficiency and in some cases become net exporters of certain agricultural items.
“For example, we are looking at being self-sustaining in rice production by the year 2018, in tomato paste by the year 2017, wheat we are looking at towards 2019.”
Also speaking on the fight against corruption, he said: “The amount of resources that individuals have pocketed is what accounts for where we are today.
“If some individuals can make away with $3 billion in just one sector and in another sector someone made away with another $4 billion, keep in mind that our entire external reserves stands at $27billion, so if individuals could make away with half of that, we really cannot talk about the economy.
“Those individuals must not only be made to account for the funds, but in the future it must be made clear that it would not be acceptable and tolerated.
“Mechanisms would also be put in place to ensure transparency in accounting for these resources. To start with, a line has been created for recovered assets in the draft budget thus making the process subject to parliamentary and public scrutiny.”
The vice-president’s concern about high lending rates in the country was re-echoed by LCCI which said that the recent increase of the MPR from 11 per cent to 12 per cent and the CRR from 20 per cent to 22.5 per cent by the CBN signalled a return to monetary tightening.
The president of LCCI, Chief Nike Akande, said among other implications of the increase in MPR and CRR for the business community and economy, it would trigger a hike in the lending rates, borrowing and overall costs in the economy.
Akande, during the chamber’s first quarter press briefing held yesterday in Lagos, explained that average naira exchange rate remained stable at the inter-bank segment of the forex market with a daily average of N196.99 to the US dollar between January 25 and March 14, 2016, adding however, that the value of the naira had depreciated by 17.2 per cent at the CBN window from N165 to the dollar in 2014 to the current rate of N196.9.
“However, the parallel market has remained under pressure for the last couple of months, even as the depreciation remains huge with the value of naira weakening by almost 100 per cent at an average of N320 to the dollar to date,” she said.
She noted that the recent sharp depreciation of the naira exchange rate in the parallel market was a cause for concern, warning that this should not be allowed to continue. She further advised that urgent steps needed to be taken to stem the slide and volatility.
“It is as much of an issue to consumers as it is to producers and other stakeholders that create value in the economy. It calls for an urgent review of the current foreign exchange policy.
“It is important to clarify some conceptual issues in this conversation. The discussion at this time should not be about devaluation of the naira. It should be about a pricing mechanism that is sustainable, predictable and transparent.
“It is about a policy regime that would reduce uncertainty and inspire the confidence of investors. It is about a policy framework that would minimise discretion and arbitrage in the foreign exchange allocation mechanism. This is what the discussion should be about,” she said.
She also recommended that a flexible exchange rate regime should be adopted to cope with the changing demand and supply conditions in the foreign exchange market, pointing out that the benefits of a flexible exchange rate model would enhance liquidity in the forex market, reduce uncertainty in the market, and enhance the confidence of investors.
She added that the model would also serve as a more transparent mechanism for forex allocation, minimise discretion in the allocation of forex and reduce opportunities for round tripping and other sharp practices in the country.
“The current framework adopted by the CBN is a fixed exchange rate regime. This model is better suited for a country that has adequate reserves to support the fixed rate. But in our case, we do not have the reserves to support the exchange rate at N197 to the dollar. This is the fundamental issue at this time,” she said.
According to her, the consequences of a fixed exchange rate regime are already manifesting in the widened gap between the official and parallel market exchange rates to an unprecedented level of over 60 per cent, lack of liquidity in the foreign exchange market resulting in acute scarcity, mounting trade debts, increasing factory closures as many manufacturers are not able to access forex for raw materials and other inputs.
The LCCI boss added that many investors are not able to meet offshore obligations while inflationary pressures continue to mount.
She said to address the situation, the chamber was recommending an adoption of a flexible exchange rate regime, adding that this would improve liquidity in the forex market, reduce uncertainty and enhance investors’ confidence.
“It will also deepen the autonomous foreign exchange market through the liberalisation of inflows from export proceeds, diaspora remittances, multinational companies, and donor agencies. Market rates should be allowed to prevail in the autonomous window,” she said.
She said the global economic condition remained weak, reflecting to some extent the decline in commodity prices, adding that uncertainty still dominates the economic and business environment.
“According to the World Bank estimates, global growth is projected at 3.4 per cent in 2016 due to the expected gradual pickup in global activity especially in developing and emerging economies.
“Modest recovery is also expected to continue in the advanced economies though with a further narrowing of output gaps,” she said.
She noted that Nigeria’s real Gross Domestic Product (GDP) growth rate fell to 2.11 per cent in the fourth quarter compared to 2.84 per cent recorded in the third quarter of 2015.
“Meanwhile, the conditions that characterised the economic slowdown in the fourth quarter of 2015, namely, uncertainty around economic policies, an adverse external environment, security challenges in some parts of the country affecting production and distribution of agricultural produce, low electricity supply, fuel shortages, and the foreign exchange crisis, persisted in the first quarter of 2016,” she added.
She pointed out that according to the National Bureau of Statistics (NBS), the consumer price index (CPI) increased to 11.4 per cent in February 2016, the highest in three years, saying that this represented a 1.8 per cent rise over the 9.6 per cent inflation in January.
“Meanwhile, the foreign exchange crisis remains the largest risk to the inflation outlook. This is a huge cause for concern to industry players as patronage, turnover and profit margin outlooks become weaker. The unusual combination of slowing growth and rising inflation present a difficult policy challenge,” she noted.
She also stated that the decline in the Nigerian stock market was showing no sign of abating any time soon as market capitalisation has continued to tumble, adding that as at 18th March, 2016, the Nigerian Stock Exchange (NSE) All-Share Index and market capitalisation depreciated by 1.13 per cent at 25,694.79 and N8.839 trillion, respectively.
“However, investors and market stakeholders expect an improvement in market situation as the economic and policy thrust of the new administration becomes clearer.
“The stock market performance is largely a reflection of the sentiments of investors in the larger economy. As the fundamentals of the economy improve, and the policy environment gets better, the stock market would rebound,” she said.
In a related event, the chief executive officer of Fidelity Bank Plc, Mr. Nnamdi Okonkwo, while addressing reporters at the end of the 326th Bankers’ Committee meeting in Lagos yesterday, disclosed that the central bank had agreed to, in the next few days, the release of five per cent reduction in the CRR to commercial banks that was announced after the meeting of the Monetary Policy Committee (MPC) last November so that the financial institutions would support the real sector.
“The committee focused on economic development. At last November’s MPC meeting when the CRR was reduced by five per cent, the intention then was to release this five per cent to banks to enable them to lend to real sector at single-digit.
“So we discussed that and agreed that the central bank would hasten the modalities for releasing this five per cent drop in CRR, so we can lend it to the real sector at a single-digit rate of interest,” the Fidelity Bank boss said.
Also, in view of the drop in the country’s forex earnings, Okonkwo’s counterpart at Guaranty Trust Bank Plc, Mr. Segun Agbaje, urged Nigerians to change their consumption patterns.
“The reality of where we are today is that we came from a price of $115 per barrel of oil to somewhere around $35 per barrel. We all have to make adjustments and our habits need to change a bit because we now have less money to spend. As corporates, we have to invest in import-substitution and develop things locally.
“We all have to make sure we allocate the scarce forex reserves that we have in ways to make the best of it and in the short to medium-term make sure we work to meet the demand. What we have in Nigeria today is a supply problem and the only way to deal with that is to cut back on demand and develop import-substitution.
“I am not sure that there is any magic we can perform as a country other than trying to make sure that your supply meets your demand,” Agbaje said.
The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, while responding to a question on the increase in banks’ non-performing loans (NPLs), blamed the rise on the downturn in economic activities, but assured her audience that Nigerian banks were safe and sound.
“The banks are conscious of this and they are preserving capital, they have enough capital as we speak and they are not distributing as much as their capital as they would have in the past, in anticipation of this risk that might crystalise,” she added.
In order to promote financial inclusion, she said the central bank had licensed two super agents – Interswitch and Innovatives Limited.
Tokunbo explained: “If you recall, sometime last year, the CBN started agency banking. There are two new agents who are expected to recruit agents and distribute banking services at cheaper prices.
“Hopefully, that is expected to take banking services to the nooks and crannies across the country at affordable prices to the citizenry.”
Meanwhile, the monthly financial and operations report of NNPC for the month of February has shown that the corporation in partnership with the central bank plans to provide up to $200 million to oil marketers to import petrol this quarter.
The report, which was released in Abuja yesterday, showed the amount of forex that the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu may have negotiated to source from the CBN and international oil companies (IOCs) for oil marketers.
The scarcity of forex is partly to blame for the perennial fuel shortages in the country.
“NNPC is also collaborating with CBN to provide $180 – $200 million to support major private importers,” the report stated in one of its annotations on NNPC’s key challenges within the period.
It showed that the NNPC has also begun plans to secure an offshore petroleum floating storage facility around Port Harcourt to service supplies to the eastern and northern part of the country through dispatches to Warri, Port Harcourt and Calabar.
The report also showed that in February, NNPC supplied over 1.1 billion litres of petroleum products to ensure constant product supply at its 559 NNPC retail outlets.
This, it added, was based on the reluctance of private marketers to import fuel due to forex scarcity and its assumption of the role of sole importer of products into the country.
The report also showed that a break on the 48-inch Forcados export line contributed immensely to its loss of N24.23 billion in February, adding that the situation denied its upstream subsidiary, the Nigerian Petroleum Development Company (NPDC), the opportunity to earn revenue from crude oil sales of about N20 billion.
“The huge deficit in the month of February 2016 was due to a production shut-in occasioned by vandalism of the Forcados export line. This situation denied NPDC the opportunity to earn revenue from crude oil sales of about N20 billion.
“This 48-inch export line was vandalised in February 2016. It crippled NPDC and all JV partners’ ability to export crude oil from the terminal. This situation led to the declaration of force majeure by SPDC occasioned by production shut-in of about 300,000 barrels of oil per day.
“This infers that circa 130,000 barrels per day of NPDC crude will be impacted for about eight weeks as repair works is ongoing. This adversely impacted on NNPC’s February 2016 report leading to a loss of about N20 billion of NPDC oil revenue,” the report stated.
On other oil sales during the period, the NNPC report said that a total of 66.68 million barrels of crude oil and condensates were lifted in the month of January 2016 by all parties.
Of this volume, 23.79 million barrels of crude oil were lifted by NNPC on behalf of the federation, comprising 16.69 million barrels lifted on the account of NNPC while 6.10 million and one million barrels were managed for the Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR), respectively.
The report said of the 16.69 million barrels lifted on the account of NNPC, 11.30 million barrels and 5.38 million barrels were for the domestic and export markets, respectively.
The crude oil, it noted, was valued at an average oil price of $28.38 per barrel and exchange rate of N196/$, while the domestic crude oil lifted by NNPC was valued at $320,723,227.98 or a naira equivalent of N62, 861,752,684.08 for the period.
The report added that the remaining crude oil lifted for exports was valued at $156,189,385.88 at an average price of $29.02 per barrel, while the total value of crude oil lifted on the account of NNPC was $476,912,613.86.