BY MICHAEL EBOH
The Finance and Insurance sector has been identified as the slowest growing sector in Nigeria due to adverse policies and regulation recorded in the sector since August 2009, according to a report on the Nigeria economy.
Chief Executive Officer, Resources and Trust Company Limited, Mr. Opeyemi Agbaje, in his business and economic review for the month of July 2011, made available to Vanguard, also attributed the slow growth to post consolidation developments, making it rank far below Telecommunication and Post, Solid mineral, Hotels and Tourism, Wholesale and retail trade, real estate and the Building and Construction sectors in terms of growth.
Agbaje further stated that the Central Bank of Nigeria’s Monetary Policy Committee’s decision to raise the Monetary Policy Rate from eight per cent to 8.75 per cent amounts to trading off interest rates, foreign reserves, real exchange rates, employment, private sector credit and overall economic activity.
He pointed out that the banking systems credit to the private sector have recorded consistent decline over the last couple of months, dropping by 2.5 per cent to N9.18 trillion from the preceding month’s level, compared with a decline of 4.2 per cent at the end of January 2011.
“All data suggests indices on unemployment; financial sector contribution to GDP; private sector credit; financial sector growth; exchange rate policy; reserves management among others, are decidedly negative. It may be time for a comprehensive review of CBN policy,” he said.
According to Agbaje, there is now increasing evidence that financial sector conditions are hurting businesses and the sector itself, evidenced by private sector credit, exchange rates, and declining financial sector contribution to Gross Domestic Products, GDP.
“It seems clear, in addition that financial sector conditions are contributing directly and indirectly to unemployment. We re-state our view that GDP growth on its own, does not significantly impact jobs, poverty and development given current economic structure. Policy must focus on HUman Development Index, HDI, employment, poverty, real sector growth and economic diversification, social statistics among others,” he added.
He declared that the CBN appears to be losing in its attempt at ensuring a steady exchange rate, at around N150 to a dollar, adding that the country is feeling the effect of these in the area of reserves, higher interest rates and the return of foreign exchange black market arbitrage.
Agbaje maintained that these will impact negatively on the country’s operating environment, as the operating conditions and costs of businesses are likely to maintain a steady upward trend.
“Telecommunications installed capacity is now equal or indeed in excess of population with tele-density at 64.7 per cent, improving the prospects for mobile banking and e-commerce.
“We urgently await the commencement of active policy and governance from President Goodluck Jonathan and his cabinet. We also hope for a wider and stronger perspective on economic management to reverse emerging negative trends on the economy.” He added.