As Finance Minister tasks banks on diversification
Determined to see accelerated economic growth in the country, the Central Bank of Nigeria (CBN) is to establish and Infrastructure Company, Infra-Corp, through which to massively invest in the much-needed infrastructure facilities across the nation.
The Governor of CBN, Mr Godwin Emefiele, announced this at the 13th Annual Banking and Finance Conference in Abuja, today.
According to him, the firm to be established in collaboration with the African Finance Corporation (AFC) and the Nigerian Sovereign Investment Authority (NSIA) would be a pool for both public and private funds for infrastructure investments.
Mr Emefiele’s words, “Another critical area that the banking sector ought to consider for stable growth of our economy is Infrastructure finance.
“With the decline in revenues due to federal and state government as a result of the drop in crude oil prices, alternative ways of funding infrastructure are critical if we are to generate sustained growth of our economy.
“As we are all aware, the cost of logistics is often seen as a significant impediment to the growth of businesses in the country.
“A well-built infrastructure system, comprising hard infrastructures such as roads and ports, and soft infrastructure such as broadband penetration, can have a multiplier effect on growth by enabling the expansion of business activities in the country.
“In this regard, I am pleased to announce that President Muhammadu Buhari has approved the establishment of a CBN led Infrastructure Company.
“Working in partnership with the African Finance Corporation and the Nigerian Sovereign Investment Authority, Infra-Corp would enable the use of private and public capital to support infrastructure investment that will have a multiplier effect on growth across critical sectors.
“This entity would also be able to raise fund from the capital markets and mobilize long term finance to address some of our infrastructure needs while providing reasonable returns to investors.
“We believe this well-structured fund can act as a catalyst for growth in the medium and the long run. The support of the banking community will be important in achieving this objective.
On the impact of the COVID-19 pandemic on the economy, the CBN boss said that although the Nigerian economy contracted by 6.1 per cent in the 2nd quarter of 2020, down from positive growth of 1.87 per cent recorded in the 1st quarter, the result was well below the forecast of many analysts, who had projected a steeper contraction of 7.4 per cent.
He added that the 6.1 per cent contraction was also better than contractions witnessed in other advanced and emerging market countries, such as Great Britain (-20 per cent), India (-24 per cent) and South Africa(-51 per cent) in the 2nd quarter of 2020.
“The less than expected downturn in the economy was due to collaborative efforts between the monetary and fiscal authorities,” he explained.
On capital flows, Mr Emefiele said that the pandemic led to a significant outflow of funds from emerging market economies, with foreign investors withdrawing over $100 billion worth of funds from emerging markets between February and April 2020.
He said, “The increase in outflows from emerging markets also led to a corresponding depreciation in the currencies of several countries such as Brazil, South Africa, Indonesia and Turkey. Nigeria was not exempted from the drop-in flows, as capital importation into the country declined from $6bn in Q2 of 2019 to $1.2bn in Q2 of 2020.”
He said that with the decline in foreign exchange earnings and subsequent adjustments in the value of the naira vis-à-vis the US dollar, the CBN has continued to implement a demand management framework designed to support improved production of items that could be produced in Nigeria, and further conservation of the nation’s external reserves.
“These measures,” he said, “have helped to prevent a significant decline in our reserves. Our external reserves currently stand at $36 billion and are sufficient to cover 8months of import of goods and services.”
Finance Minister tasks banks on diversification
Meanwhile, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has tasked Money Deposit Banks (DMBs) in the country to join the federal government in its efforts to diversify the nation’s economy.
She said: “Today, as bankers and fund managers, you stand in that position to partner with government in its efforts to diversify the economy and reposition the country for a sustainable future. Therefore, you must redouble your efforts, to mobilise domestic resources and attract foreign investment to create quality job opportunities for our teeming youths and lift people out of poverty.
“With the current partial lifting of the lockdown measures, there are positive indications that some businesses are getting back to pre-pandemic levels, however, the uncertainty over the duration and intensity of the pandemic, as well as its impact on the economy continues to be a cause for concern.
“In the wake of the pandemic, the government in concert with regulatory authorities had stepped forward with various liquidity, monetary, prudential and supervisory measures in the form of interest rate cuts, higher structural and durable liquidity, a moratorium on debt servicing and forbearances on asset provisioning.”
She said that the federal government expected efficient and diligent implementation of the restructuring measures by banks, keeping the above objectives in mind.