Some financial experts in Nigeria have asked the government to implement consistent policies that will ensure businesses, especially those that are FX dominated, stay alive.
Some of the sectors mostly affected by foreign exchange include aviation, manufacturing, oil and gas, and financial services.
Speaking during the sixth Detail Business Series yesterday organised by Detail Commercial Solicitors, Bismarch Rewane, managing director, Financial Derivatives Company, said as a result of the volatile exchange rate, the aviation sector incurred several losses, some of which include delay in repatriation of funds, exit of some foreign airlines and reduction in number of flights.
Rewane noted that the financial services have seen an increase in NPLs especially for banks exposed to oil and gas and manufacturing (average NPLs is 11.7% and prudential limit is 5.0%), adding that some banks such as Zenith, GTB and Access have recorded higher profits due to forex translation gains.
He listed some of the risks of forex instability to include decline in oil prices, reduced oil production, depletion of external reserves – if it falls below $25 billion and vulnerability to external shocks and global recession.
He said if policies are consistent then in future, Nigeria is likely to improve its trade. The Economic Intelligence Unit, (EIU) projects increase in terms of trade from 16.5percent in 2016 to 18.8percent in 2017.
Also speaking at the event, Ayuli Jemede, lead partner, Detail Commercial Solicitor, said airlines cannot continue to survive on the back of government’s intervention fund, rather, the Government should set up regulatory policies where people can project, plan and do their businesses.
“If the foreign exchange is N400, airline operators should plan with it and increase ticket fares. Those that can afford it will fly, those that will go by road, wills go by road and those that will take train will have to take train. But this issue of government giving airlines intervention fund all the time is no longer going to work.
“The reality is that businesses should thrive based on the principles of demand and supply. In the past, intervention funds have been given to the aviation sector but some airlines did not use it wisely. Government should be in charge of policies, regulations and consistency,” Jemede said.
Sonnie Ayere, CEO, Dunn Loren Merrifield, said Nigeria still depends on importation today because we lack infrastructures to produce, adding that most of our food are wasted because we do not have enough storage capacity.
Ayere insisted that if government channel money into the right direction, then Nigeria would attract foreign investors.
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