Experts at the recently held BusinessDay’s Annual Capital Market Conference have canvassed for the reactivation of commodity exchanges in the country if Nigeria is to tap the benefits of diversification which is the focus of the Buhari led administration.
The suggestion came on the heels of the persistent fall in crude oil prices at the international market which has made diversification inevitable for countries whose main source of income are earnings from the sale of crude.
The experts also implored the capital market regulatory authorities to give more attention to the mobilisation of savings which could be channeled into investments in the capital market.
“We must have commodity exchanges that align with agricultural value chains if Nigeria is to benefit fully from economic diversification into the agricultural and solid mineral sectors. In addition, there must be national savings agenda. This is because before we can mobilise foreign investment, we must have domestic savings program” said Albert Okumagba, during the panel discussion.
While making her keynote address, Razia, Khan, chief economist, Africa Global Research, Standard Chartered Bank London, said Nigeria, Africa’s largest oil producer is struggling to cope with a slump in the price of crude because we neglected diversification when oil prices were high. She further stated that now that oil accounts for less that 30 percent of Nigeria’s GDP, national discourse should not have been entirely around oil.
She opined that lower oil price was the best thing to happen to Nigeria in recent times as this will force government officials to pursue diversification policy rigorously just as she suggested that government should create enabling environment as this will fuel growth.
“Nigeria needs strong institutional reforms and has to look at its policies holistically. This is the time Nigeria should move from an allocating economy to a production economy” Khan said.
She added that Nigeria will have to deepen its domestic market from the point of thickening just as it is an economic reality that when an economy grows, imports grow as well.
The country has been faced with a lot of pressures with its equity market falling the most in recent times and the naira has also come under tremendous pressures. It should be recalled that foreign investors have criticized Nigeria’s stance on the appropriate valuation of the naira, a development which prompted many foreign investors to sell off their equities and bonds with attendant losses on their holdings in foreign-currency terms.
The Central Bank of Nigeria (CBN) last week cut the Monetary Policy Rate (MPR) and the Cash Reserve Ratio (CRR) in other to make banks lend more to the real sector of the economy, and this has put further pressures on the naira.
Concerning the outlook for 2016, analysts at the conference were unanimous that recovery in crude oil prices will not happen in the near term suggesting that Nigeria will have to increase revenue mobilisation in the non-oil sector.
To do this, banks will have to ramp up lending to the manufacturing sector which is a way to substitute for imports especially with respect to the items on which forex restriction was placed recently by the CBN. And in view of the deteriorating exchange rates for most African countries, it may be difficult to tap into the Eurobond market in the near time.
JOSEPHINE OKOJIE &TELIAT SULE
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