By Udeme Clement
The crisis rocking the financial sector has deepened as exchange rate rose to over N370 per dollar. The foreign reserve also declined by $1.14billion. Non-Performing Loans (NPLs) in commercial banks, according to statistics averaged 4.7 percent last year and may increase to 10 percent in the medium term by 2016, due to the banks exposure to oil and gas sector. At present, NPLs in 17 banks are estimated at over N9.9trillion, even as the World Bank’s loan to Nigeria stands at over $6.29billion.
When Sunday Vanguard visited some Bureau de Change (BDC) in Lagos, last week, some operators were changing naira at 370 to a dollar, while others were doing at 377 depending on the location. Some BDC operators, who spoke with our correspondent at the premises of Lagos Airport Hotel, Ikeja, blamed the scarcity of forex on declining oil prices, while others expressed displeasure on the new forex policy of the Central Bank of Nigeria (CBN), saying the apex bank’s decision to ban BDC from the official forex window was worsening the situation.
The South West Chairman, Association of Bureau de Change Operators of Nigeria (ABCON), Mr. Taiwo Ebenezer, who spoke on Business Morning with Channels Television, said that the only allocation of forex that was coming to BDC before the ban was five percent, while the remaining 95 percent went into big transactions.
He said, “So, if CBN can sustain that five percent, the scarcity will drop, thereby allowing the naira to appreciate a little. In 2015, the economy recorded about $20billion remittance from Nigerians abroad. If the CBN can approve for us to access this source of forex and other windows like dollars from International Oil Companies, exports proceeds and other windows as part of the autonomous market sources, the exchange rate would reduce to at least N250 per dollar.”
On if BDC initially had access to some of these forex windows, he said, “We accessed some of these windows until 2014, when the current CBN governor took over the apex bank, and operators of BDC were banned from having access to such windows. We have written to CBN and suggested that these windows be opened, if not, we should not be surprised to see naira depreciating up to 400 and above per dollar. Also, about 30.000 of our members across the country became jobless due to new CBN policy on forex.”
He went on, “The BDC plays a crucial role in the financial system because we give dollars to operators of Small and Medium Enterprises (SMEs), business travellers, people travelling abroad for urgent medical services, those going on vacation and people going to school abroad. So, let the apex bank relax some of its forex policies for scarcity of forex to reduce”.
Responding to the issue of excessive demand of dollar By Nigerians for importation, he said, “While we are not supporting excessive imports of goods that can be manufactured locally, there is need for government to revamp the industrial sector to curtail excessive imports, they must ensure that the education system is of a better standard, provide adequate health facilities and other things needed to turn our economy around, until those things are put in place, people need forex now for transactions. The CBN should see BDC as a tool they are using to maintain exchange rate stability, because they gave us operating licences and the guidelines to operate within the financial system.”
Nigerians not ready for zero-base budgeting:
In a chat with Sunday Vanguard, a financial expert and the former National President, National Union of Banks, Insurance and other Financial Institutions Employees (NUBIFIE), Mr. Ade Martins Odigie, explained that the zero-base budgeting system that President Muhammadu Buhari is proposing, is a technique that does not give room for any form of financial estimation, either for projects or general expenditure in various sectors of the economy.
He said, “This type of budgeting method calls for the actual cost of financial commitments needed for projects development for a fiscal year. For example, if government wants to embark on a community project of let say N10million, it means the exact N10million should be allocated for such project, and not N15million. That way, it does not allow for any financial estimation that is above the actual cost of the project. But the issues that must be taken into consideration are; are Nigerians ready for zero-base budgeting? Are we trained for it?
“Zero-base budgeting is a good economic policy because it allows for transparency and accountability in the system. But the economic implication is that, it brings about slow growth because the President, who is the chief accounting officer of the country, must know everything that is spent on any project. As such, it slows down the growth process.”
Giving insight into the latest disclosure that NPLs may rise from 4.7 percent to about 10percent in the medium terms, as 17 banks account for about N9.9trillion exposure to the oil and gas sector, he said, “The way the trend is going, banks may begin to downsize on their workforce because a lot of things are putting pressure on the banking system. For example, the crisis in the economy itself is putting pressure on the banks, following the declining crude oil prices. Many companies, in particular oil and gas owe banks a lot of money”.
“The Treasure Single Account (TSA) introduced by the current administration is also shrinking the volume of money the banks have. This is because, before the TSA system, many banks were keeping money for federal parastatals and other agencies of government. Now, they do not have access to such funds since the money is transferred into a single account. Aside from that, there are demands for credit from banks by manufacturers and entrepreneurs operating in different sectors of the economy. So, the pressure on banks is overwhelming. “
On the way out, he said, “The reality is that it will take a little time for the economy to stabilise. Therefore, everybody must work together to move the economy forward. We must curtail the rate of imports and look inward to see how we can build the non-oil export sectors to earn more foreign exchange.”