• Thursday, March 28, 2024
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BusinessDay

Buhari tasks Nigerian banks to redouble efforts to attract foreign investments, create jobs

Nigeria delivers much-needed interest rate cut, but is there room for it to work?

Nigeria’s financial institutions are in the position to partner with the government in its effort to diversify the economy and reposition the country for a sustainable future, according to President Muhammadu Buhari.

The president made this known on Tuesday at the 13th Annual Bankers Conference by the Chartered Institute of Bankers of Nigeria (CIBN).

Buhari, who was represented by Zainab Ahmed, Minister of Finance, said, “You must redouble your efforts to mobilize domestic resources to attract foreign investments to create quality job opportunity for our youth and to lift a lot of Nigerians out of poverty.”

Meanwhile, the Buhari-led administration plans to lift 100 million Nigerians out of poverty over the next 10 years. But Nigeria’s title as the poverty capital of the world means that the citizens of Africa’s largest economy have become poorer and this, according to analysts, has been aggravated by the impact of the COVID-19 pandemic as it has eroded consumers’ purchasing power.

Exacerbated by the impact of COVID-19 lockdown which was enforced to contain the spread of the novel coronavirus, Nigeria’s economy contracted for the first time in three years at -6.1 percent in the second quarter of 2020. This means the economy is a quarter away from its second recession in four years.

But, long before the pandemic started spreading across the globe late last year; Nigeria’s economy had been crippled by underlying challenges.

Read also: CBN sees continued inflation uptick as economy reels from covid-19 pandemic, low oil prices

An evaluation of Nigeria’s macro-economic indicators before the pandemic exposes how the pandemic only made what was already a bad situation worse.

With an economic growth that is too slow to create sufficient opportunities for a rapidly rising population, Nigeria, Africa’s largest economy has been a tough country for millions of its citizens who, in the last five years grew progressively poorer.

Nigeria’s economy which has been gasping for breath since 2015 means more of its citizens are falling into extreme poverty as more than 82 million of them live on less than $2 (N750) a day.

Economic growth in Africa’s most populous nation averaged 1.2 percent between 2015 and 2019. Problem with that is the population grew two times faster at an average of 2.6 percent per year.

According to Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), the apex bank has seen the resilience of the Nigerian economy as stakeholders have adopted a new business model to adapt to the pandemic.

“Following the implementation of the intervention in the agriculture and manufacturing sectors and the significant uptick in economic activities, we do expect that the GDP growth in Q3 will reflect the significant recovery relative to the second-quarter growth,” Emefiele said at the Bankers Annual conference that simultaneously took place in Lagos and Abuja on Tuesday.

In response to the current health and economic crisis occasioned by the COVID-19 pandemic, the CBN governor said the federal government had rolled out both fiscal and monetary packages in the form of domestic interventions.

Explaining some of the polices, the minister of finance quoted Buhari to have said that: “In the wake of the pandemic, the government in a concerted effort with regulatory authorities have set up various liquidity measures, monetary and supervisory measures in the form of an interest rate cut and durable liquidity moratorium on debt service and forbearance on asset provisions.”

According to the president, the framework has been planned in consultation with various stakeholders and is aimed at striking “balance between protecting the interests of the depositors and maintaining fiscal stability.”

With interest rate on government securities at a record low, the central bank recently issued a new directive that slashes the minimum interest rate banks pay on savings deposits to 1.25 percent from 3.75 percent and this, according to analysts holds a mixed bag of fortunes for the economy.

While banks are expected to be the biggest beneficiary of the rate reduction as it boosts their profitability, Nigerian savers are going to be negatively hit.

“Savers who have to earn below inflation rate return on their savings would see the value of their money eroded. Thus, by the time repayments are made, the purchasing power of the saved money would be lower which implies lower income, lower demand and lower output,” Ayorinde Akinloye, a Research Analyst at CSL Stockbrokers Limited said.

Delivering a Goodwill message at the CIBN conference with the theme: Facilitating a Sustainable Future: The Role of Banking and Finance, the Governor of Lagos State, Babajide Sanwo-Olu said:” It is clear that public sector cannot do everything by itself.”
According to Sanwo-Olu, one of the primary responsibility of the government is to expand the space private sector, “for you to put your money and resource into the development of our various state and cities.”

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