Nigeria needs to build reserves that will support $1trn economy – Teriba

…As Shettima gives breakdown of $20bn investment secured under Tinubu

Nigeria will need to build up reserves that will support a trillion-dollar economy, according to Ayo Teriba, CEO of Economic Associates (EA).

He stated this at the 2024 Vanguard Economic Discourse in Lagos, saying, “tightening monetary policy without reserve adequacy is futile.”

Nigeria’s external reserves currently stand at $32.73 billion as of May 21, 2024, data from the Central Bank of Nigeria (CBN) website indicated.

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“Let’s speak more about what is being done. $40 billion in reserves is not adequate even for a $350 billion Gross Domestic Product (GDP) much less for a trillion dollars. What are we doing to ensure that reserves can be up to $60 billion, $80 billion or $100 billion? No country with stable exchange rates doesn’t have a wall of reserves. And it’s very, very important,” Teriba said.

He pointed out that Nigeria’s GDP has consistently decreased over the past decade, dropping from $600 billion in 2015 to $350 billion. This decline poses challenges for taxation and borrowing, as exports have also diminished. Relying on exports, taxation, or debt has proven problematic, as demonstrated during the Jonathan administration when oil prices plummeted and continued under the Buhari regime. Both administrations needed to shift focus from income dependence to asset dependence to stabilize the economy.

According to him, many nations, such as Japan, Germany, and various EU countries, are grappling with the challenge of reliance on income or output, a trend that has led to stagnation or decline in their economies. Japan, in particular, shares similarities with Nigeria, experiencing a steady decline in GDP over the past decade.

His words: “In the era of global post-industrial transition, the focus is shifting from output dependence to asset dependence. The United States serves as a prime example, showcasing steady growth driven by its robust asset base. India has similarly risen in global economic rankings, moving from the 10th to the 5th largest GDP and poised to surpass Japan and Germany, by leveraging global liquidity with local assets.

According to the CEO of Invest India, the country has attracted a staggering $500 billion in foreign direct investment (FDI) since 2015, demonstrating the potential for asset-driven growth to offset export losses.

Nigeria boasts abundant assets, including valuable state-owned enterprises, yet their potential remains largely untapped. Rather than outright selling, there’s an opportunity to establish market value through equity stakes. By leveraging these assets, Nigeria could unlock significant value, as seen in Saudi Arabia’s successful market debut in 2019, now valued at $2 trillion.

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Exploring corporate assets reveals vast untapped potential, possibly amounting to half a trillion dollars. Valuable real estate assets, such as the National Stadium and Federal Secretariat, remain underutilised. Leveraging these assets could yield substantial returns, as demonstrated by Eko Atlantic City and its neighbouring properties.”

Earlier in his keynote speech, Olayemi Cardoso, governor of the CBN, the foreign exchange (FX) inflows recorded in the first quarter (Q1) into Nigeria was 136 per cent of the total inflows recorded in 2023.

Represented by Blaise Ijebor director of risk, he said, “We remain committed to using all the orthodox monetary policy tools available to us to address inflation. We have also embarked on major reforms to liberalise the foreign exchange market, which has enhanced transparency, reduced arbitrage opportunities, promoted stability and improved the liquidity in the market.”

Vice President Kashim Shettima at the event gave a breakdown of the $20 billion potential investment secured since the administration of President Bola Ahmed Tinibu.

The investments include $14 billion from India, N15 million from the Netherlands, $500 million for lithium development in Nasarawa state, $500 million from Germany and into renewables, and $250 million from the Netherlands, among others.

Shettima disclosed this in Lagos at the 2024 Vanguard Economic Discourse. Represented by Tope Fasua, special adviser on economic affairs,

The administration’s efforts have been spearheaded by a public sector team led by the Office of the Vice President, which also chairs the National Economic Council, along with the Central Bank of Nigeria and the Budget Office of the Federation.

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Also speaking during the panel session, Bismarck Rewane, managing director/chief executive officer of Financial Derivatives Company Limited, said, “We must look at economic policy in the context of Egypt. Egypt is practically located. Egypt is critical to what is happening in Palestine and Gaza. Therefore, if Egypt is raising money, and I think 8.5 billion dollars of it is in Egypt, the entire world is also in its interest. They salvage this money and they also devalue their currency. The question is can Nigeria attract money from Egypt?