…Says exchange rate artificially low, adds there’s need for synergy between monetary, fiscal authorities
…Economists, experts raise controversies over VP’s position
…Nigeria to start local production of weapons to address over-dependence on foreign supplies, says Buhari
…Promises completion of key projects before tenure expiration
…Fear grips ministers as Buhari opens performance review
By Peter Egwuatu, Yinka Kolawole, Johnbosco Agbakwuru & Nkiruka Nnorom
Against the backdrop of the recent exchange rate crises, the Vice-President, Professor Yemi Osinbajo, has advocated allowing market forces to determine value of the Naira.
However, experts believe the devaluation of the Naira is unnecessary now. They argued that the effective exchange rate even by IMF standard is between 435 to 440 stating that the over valuation is less than 5%.
But speaking at the mid-term retreat on President Muhammadu Buhari’s second tenure, the vice-president said the exchange rate is artificially low, and this is deterring investors from bringing foreign exchange into the country.
“As for the exchange rate, I think we need to move our rates to [be] as reflective of the market as possible. This, in my own respective view, is the only way to improve supply,” Osinbajo said.
He added: “We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is just my view.
“Anyway, all those are issues that when the CBN governor has time to address, he will be able to address in full.”
The naira is changing for a dollar at N411 at the official side of the market, while the same goes for N565 to the US currency at the parallel market as at yesterday.
CBN competing with ministries
Osinbajo suggested that the CBN is competing with the fiscal side of the economy, which includes ministries, departments, and agencies of government.
“There must be synergy between the fiscal and the monetary authorities. We must be able to deal with the synergy, we must handle the synergy between the monetary authority, the CBN, and the fiscal side.
“Sometimes, it appears that there is competition, especially on the fiscal side. If you look at some of the interventions, you will find that those interventions are interventions that should be managed by ministries.
“The Ministry of Industry, Trade and Investment should handle MSMEs (micro, small and medium enterprises) interventions, and we should know what the CBN is doing. In other words, if the CBN is intervening in the MSME sector, it should be with the full cooperation and consent of the Ministry of Industry.
“Sometimes you will get people who are benefiting more than once because we simply have no line of sight on what is going on, on one side.”
Speaking on surviving the economic challenges of 2020, Osinbajo said Buhari deserves the credit for providing steady leadership through the crisis.
“Let me say on the whole that we have been able to weather the storm of a very very serious economic challenge. I think that is largely on the steady and stable leadership we received from the president. I think if Mr. President had panicked in that period, we would have had a lot of difficulties, perhaps we would be in a much worse situation. He deserves the commendation for providing that steady hand when that was required.”
Economists, experts raise issues over VP’s position
Vanguard’s findings from economists and financial experts show divergent positions which creates a level of controversy around the position of Osinbajo on the foreign exchange market policy change.
CBN doesn’t trust the market – Muda Yusuf
Speaking to Vanguard, an economist and immediate past Director-General of the Lagos Chamber of Commerce and Industry, LCCI, Dr Muda Yusuf, stated: “What we are experiencing in the foreign exchange market (forex) is largely consequence of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex. It is a policy regime that has created a huge enterprise around foreign exchange — round tripping, speculation, over-invoicing, capital flight etc.
“The responses of the apex bank largely amount to tackling the symptoms of a problem rather than dealing with the causative factors. CBN does not seem to believe in or trust the market mechanism. Yet market systems are time tested as instruments of efficient resource allocation in leading economies around the world.”
Yusuf who is also the chief executive of the Centre for Promotion of Private Enterprise, CPPE, argued that though market failures are possibilities in any market, the fear should not lead to market suppression.
He stated: “Of course market failures are recognised in economics, and these are exceptions that can be identified and dealt with. Suppressing the market is like swimming against the tide. It is a difficult battle to win. The NAFEX Window is a subsidised window.
“Managing a subsidy regime is typically a herculean task. We have seen this happen with fertiliser subsidy, essential commodities subsidy, and petrol subsidy. The story cannot be different with foreign exchange.
“The way out of this forex conundrum is for CBN to allow the market to function. It is also imperative for the apex bank to de-emphasize demand management and focus on strategies to stimulate forex inflows. A fixed exchange rate regime is a major disincentive to inflows and creates enormous pressure of demand for forex. It is a contradiction in terms.
“CBN needs to give the market a chance. Its current approach will continue to deepen distortions in the economy, perpetuate round-tripping, fuel speculation, suppress forex supply and boost underground economy.”
Implications are scary — Uwaleke
Commenting, Uche Uwaleke, Professor of Capital Market at the Nasarawa State University, Keffi, said: “The first casualty will be the 2022 Appropriation Bill. It means the 2022 budget, which is predicated on N410.15 per dollar is dead on arrival.”
Continuing, he said: “The Vice-President obviously means well. But this statement is capable of triggering panic buying and speculation in the forex market (official and parallel) and further complicating things for the CBN. No doubt, devaluation will force down the volume of imports and reduce the pressure in the forex market temporarily.
“But have we thought of the impact it would have on pump price of fuel and the multiplier effects? How about the knock-on with regard to inflation and interest rates especially at a time when inflation rate remains elevated? Is high inflation rate not inimical to investments whether local or foreign?
“The argument that naira devaluation will incentivise foreign investors remains to be seen as other factors such as insecurity equally play a part.To be sure, the naira has suffered several devaluations in recent past. It has neither solved the fundamental problem of helping to diversify the export base nor curbed unbridled imports. Doing so yet again will not change anything. Rather, it’s a recipe for high poverty and unemployment levels.
“Again, suggesting that the CBN should discontinue its forex demand management strategy to the effect that certain items are excluded from accessing the official window has grave implications for exchange rate and the economy. If anything, it negates the import substitution drive of the present administration.
“The good news is that the CBN has sufficient external reserves to meet genuine demands for forex at the Investors and exporters window. This much we have been told. The CBN should continue to manage it while joining hands with the fiscal authorities to create multiple sources of forex beyond oil.”
Presents arbitrage opportunities — Chiazor
Also commenting, managing director of FSL Securities Limited, a Lagos-based investment house, Mr Victor Chiazor, stated: “Though the proposed devaluation by the Vice President might bring temporary relief to the market but would, unfortunately present an arbitrage opportunity for few players.”
He opined that floating the naira remained one of the best options for dealing with currency manipulation.
He said: “The vice president must have given his view based on the information available to him and the perceived benefits which may come with a devaluation of the naira. However, I don’t quite think a devaluation would solve our problems. It may bring temporary relief to the market but the parallel market will eventually adjust to present an arbitrage opportunity to a few players.
“The option to float the naira remains one of the best ways of dealing with the issue of currency manipulations, though the naira value may weaken once it’s floated but we expect that to trigger foreign investors who will now accept the market price of the naira as its true value.
“We should also note that if we don’t become productive and find ways of increasing our foreign currency earnings and attracting substantial foreign inflows, we may never see the value of the naira appreciate, even if we devalue or float the naira.”
Nigeria to start local production of weapons — Buhari
Meanwhile, President Muhammadu Buhari, said he has instructed the Ministry of Defense to create a modest military industrial complex for local production of weapons to meet some of the requirements of the country’s armed forces.
Declaring open the two-day Mid-Term Ministerial Performance Review Retreat, President Buhari disclosed that the establishment of industrial complex would address Nigeria’s over-dependence on other countries for military equipment and logistics.
He said the project is being implemented under the Defense Industries Corporation of Nigeria (DICON), a military department responsible for arms manufacture.
The retreat was organized to assess progress made towards realization of the nine key priorities of his administration.
Ministers jittery over assessment
Meanwhile, there appears to be palpable fear among ministers and top government officials as the ministerial performance review kicks off with the assessment of ministers, permanent secretaries and top government officials.
It will be recalled that President Buhari had sacked the former ministers of power, Saleh Mamman, and his agriculture counterpart, Sabo Nanono, on September 1, 2021 and warned that the exercise would be a continuous process.
Presidency sources hinted that the president may be waiting for the outcome of the ongoing assessment to determine his next step, which may involve relieving those who may have performed abysmally.
An unconfirmed report has it that about 15 ministers who have not performed as expected are on the watch list.
Speaking at the ceremony at the State House Conference Hall, Abuja, President Buhari noted that the idea of the assessment was to identify weak areas with a view to strengthening the ability of government to deliver the goods to the people.
On other efforts to strengthen national security, the President said it is gratifying to note that Nigeria has received six A-29 Super Tucano aircraft.
He said the propeller-driven aircraft are being used for training, surveillance and attack by the military.
He stated: “As part of the efforts towards strengthening our national security, we have increased investments in arms, weapons and other necessary equipment; expanded the National Command and Control Centre to nineteen states of the Federation; and established a Nigerian Police Trust Fund, which will significantly improve funding for the Nigeria Police Force.
“We have also approved the sum of N13.3 billion for the take-off of the Community Policing initiative across the country as part of measures adopted to consolidate efforts aimed at enhancing security nationwide.
“To address our over-dependence on other countries for military equipment and logistics, I have instructed the Defence Ministry to create ‘a modest military industrial complex for the local production of weapons to meet some of the requirements of the country’s armed forces. This is being implemented under the Defence Industries Corporation of Nigeria (DICON), a military department responsible for arms manufacture.
“It is gratifying to note that only recently, we received six A-29 Super Tucano aircraft as part of our efforts to boost the nation’s campaign against insecurity. The propeller-driven aircraft are being used for training, surveillance and attack by the military”, he said.
Buhari assures on 2nd Niger Bridge, Lagos-Ibadan expressway
The President also assured Nigerians that the 11.9 km Second Niger Bridge, 120 km Lagos-Ibadan Expressway and other key projects under the Presidential Infrastructure Development Fund (PIDF) will be completed within the second term of this administration.
He used the occasion of the retreat, the third edition since the second term of his administration, to highlight some of the Federal Government’s notable achievements in the last two years.
He listed accomplishments in the areas of infrastructure, transportation, economy, electricity supply, the petroleum industry, among others.
He said: “On transportation, we are growing the stock and quality of our road, rail, air and water transport infrastructure.
“The PIDF projects are also advancing remarkably. These include the 11.9km Second Niger Bridge, 120 km Lagos-Ibadan Expressway, 375 km Abuja-Kaduna-Zaria-Kano Expressway and the East-West Road. Most of these projects are expected to be completed within this second term of our administration.”
President Buhari expressed delight that over the past two years, ministers have rendered reports to the Federal Executive Council on their activities related to the achievement of their ministerial mandates.
“Some of the notable achievements include the establishment of InfraCo Plc in 2020, as a world class infrastructure development vehicle, wholly focused on Nigeria, with combined debt and equity take-off capital of N15 trillion, to be managed by an independent infrastructure fund manager.
“The Presidential Infrastructure Development Fund was also established in 2020 with more than USD 1 Billion in funding.
“In addition, we have launched the Nigeria Innovation Fund by the Nigerian Sovereign Investment Authority (NSIA). This is aimed at addressing investment opportunities in the domestic technology sector: data networking, data centers, software, Agri-tech, Bio-tech, and more”, he said.
He further noted that his administration had made tremendous progress on railway projects in the country, noting that upgrading of the railway network is being extended with the recent completion of the Lagos-Ibadan line.
He said, “The Itakpe-Ajaokuta rail line has finally been completed and commissioned after 30 years of its conception.
“Work is expected to commence very soon on the Port Harcourt-Maiduguri line and Calabar-Lagos Coastal Line to connect the southern and eastern states of our Country. Progress is also being made on the upgrading of our airports, with state-of-the-art facilities in line with world-class safety standards.”
On the economy, the President said the nation witnessed three consecutive quarters of growth, after negative growth rates recorded in the second and third quarters of 2020.
He said: “The GDP grew from 0.8% in 2017 to 2.2% in 2019, but declined in the first quarter of 2020, as a result of the downward trend in global economic activities triggered by the COVID-19 Pandemic.
“As at Second Quarter 2021, GDP growth rate was at 5.01%, the highest since the inception of this administration.”
President Buhari also spoke on the Power sector, noting that the implementation of a ‘Willing Buyer-Willing Seller’ Policy has opened up opportunities for increased delivery of electricity to under-served homes and industries.
He expressed the hope that execution of critical projects through the Transmission Rehabilitation and Expansion Programme, will result in achieving the national goal of improved power supply by 2025.
On the Petroleum Industry Act signed into law on 16th August 2021, the President reiterated his directive to the Implementation Committee to complete all processes for the successful operationalization of the Act within 12 months. On efforts to empower the youth and other vulnerable groups by enhancing investments in the Social Intervention Program-mes, the President said he has approved the expansion of the National Social Register (NSP) by one million additional households.
The NSP is the official database for the implementation of the Conditional Cash Transfer programme.
He said: “We have established the N75 billion Nigerian Youth Investment Fund created to boost the Nigerian economy through leverage and access to finance for youths.
“The Fund should serve as a catalyst to unleash the potential of the youth and to enable them to build businesses that will stimulate economic growth and create jobs. These accomplishments are a testament to the fact that all hands are on deck in establishing a solid foundation for even greater successes in future.”
President Buhari warned all ministers and permanent secretaries to take seriously all issues relating to the implementation of their mandates towards the attainment of the laudable objectives of this Government.
The President at the occasion unveiled the Presidential Priorities Performance Management System.
He explained that the Performance Management System and Dashboard, which has been in effect since January this year, had provided him the opportunity to track projects in real-time with live data.
He said: “In our continuing drive to ensure accountability, we have incorporated a Performance Management Framework into the functions of the Central Delivery Coordination Unit for ease of tracking of the Ministerial Deliverables along the lines of the nine priority areas of this administration.
“This initiative has provided me the opportunity to track the performance of all Ministries and by extension my Administration.
“This process has been in effect since January 2021 and today it gives me great pleasure to unveil the Performance Management System and Dashboard to track projects in real-time with live data and early warning system to proactively resolve bottlenecks.”
To show the importance of the retreat, President Buhari announced that he would sit through all the sessions to listen to the cumulative assessment of this administration’s performance over the last two years.
Besides, he said he would join in discussions on the best approach and strategies to implement planned policies, programmes and projects that can significantly diversify the economy away from its dependence on oil revenue, while sustaining the current economic growth trajectory.
Speaking earlier, Secretary to the Government of the Federation, Mr. Boss Mustapha, said the administration had approved 878 contracts in the past six years and that most of the contracts were targeted at the country’s infrastructure, to boost economic growth and development.
In terms of the performance of the Federal Executive Council (FEC), the SGF acknowledged that the last two years had been most productive.
He said, “during this 2nd Term of Mr. President from May 29, 2019, to August 31, 2021, the Federal Executive Council held 52 Meetings and granted 579 Approvals comprising of 381 Contracts, 110 Policies and 88 Briefs/Notes.
“Overall, the total number of Contracts, Policies and Briefs/Notes approved by the Federal Executive Council between November 2015 and August 2021 stand at 1,403 comprising of 878 Contracts, 319 Policies and 206 Briefs/Notes.
“From the above, the 878 contracts approved by FEC have mostly targeted the provision of infrastructure, geared towards enabling faster economic growth and development.”
Among those who gave goodwill messages at the opening of the event were the Director-General of the World Trade Organisation (WTO), Dr Ngozi Okonjo-Iweala; the Deputy Secretary-General of the United Nations (UN), Amina Mohammed; while the President of the African Development Bank (AfDB), Dr Akinwunmi Adesina, delivered a speech.
The event is being attended by top members of the administration and the federal civil service, including ministers and permanent secretaries.