- Fresh IMF Report Raises Apprehension • Wants Naira Devalued •Urges More Taxation Of Nigerians •Faults Economic Managers •Experts Kick, Offer Alternative Solutions
As thousands of government officials, journalists, civil society organizations, and participants from the academia and private sectors, gather in Washington DC for the Spring Meetings of the World Bank Group and the International Monetary Fund, IMF Seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial markets. This year’s Spring Meetings events will take place in Washington, DC, April 21-23, 2017. The plenary session of the IMF and World Bank Group’s Boards of Governors is scheduled for the Annual Meetings in autumn.
This is amidst the worst recession in the country’s history, the latest report by the International Monetary Fund, IMF, has declared that the naira is over-valued by between 10 and 20 percent just as it urges the government of the day to increase tax levels to boost its income. The report also tasks Nigeria on urgent economic reform.
In the report, IMF disclosed that Nigeria’s 2017 projections for non-oil revenues are more optimistic than the IMF’s while urging authorities to increase tax levels to diversify its income.
In a document available on the agency’s website, IMF outlines a catalogue of failings in Nigeria’s handling of its economy which, according to the agency, could affect talks over at least $1.4 billion in international loans.
According to the body which many world governments eye with suspicion, the Nigerian currency, the naira, is overvalued to the tune of 10 to 20 per cent, and for largest economy in Africa to recover, much more need to be done.
According to Gene Leon, IMF mission chief for Nigeria, “We do find there to be some over-valuation at this point of the naira, of the official currency, somewhere to the tune of 10 to 20 percent.”
This position was however countered by a financial expert, Kenneth Doghudje who wondered how IMF arrived at such conclusion.
“It would be important to know from the IMF at what stage they discovered that the naira is overvalued. Is it not the same naira that lost a lot of value against the dollar recently? So would it be perfectly valued at N600 to the dollar? I think it is right to do everything to keep the value of the naira strong where possible,” he said
Doghudje, has however urged the country to consult widely with economic experts of countries who had faced similar crises in the past as well as local experts.
This is even as he called for the inclusion of economic experts like Bismarck Rewane of Financial Derivatives Company; former Governor of Central Bank of Nigeria, CBN, Professor Charles Soludo and former Minister of Finance, Kalu Idika Kalu in a revamped Economic Management Team, EMT.
“Government should consult widely with economic experts whose countries have similar challenges with their economies as well as local experts like Bismarck Rewane, Dr Idika Kalu, Professor Soludo and others.
Speaking further, Doghudje said “These experts should constitute a Revamped Economic Management Team that would chart an economic recovery plan for the country.”
DMB’s Not Healthy
The IMF report further suggested that Deposit Money Banks, DMB’s in the country are not totally healthy at present. These banks have had to battle with an astronomical increase in the number of bad loans and other shocks, as most of their debtors are oil companies which suffered the dual blow of dropping oil prices and Forex scarcity.
According to the IMF, “quickly increasing the capital of undercapitalized banks and putting a time limit on regulatory forbearance” should be a matter of urgency.
This position was also corroborated by CBN in its latest Financial Stability Report (FSR). According to the report “macroeconomic challenges, including increased inflation rate, negative Gross Domestic Product (GDP), among many other factors, have contributed to the DMBs Non-Performing Loans, NPLs, to gross loans at 14 per cent in 2016.
According to the report, the banking industry stress test carried out in 2016, covered 23 commercial and merchant banks, to evaluate the resilience of the banks to credit, liquidity, interest rate and contagion risks.
“During the review period, the banking sector witnessed a rise in non-performing loans due to weakening economic conditions with four Systemically Important Banks, D-SIBs, recording NPL ratios above the regulatory limit of five per cent. The CBN directed the D-SIBs to take appropriate actions to address the breach.”
However, the apex bank’s spokesperson, Mr. Isaac Okorafor, has said the macroeconomic economic situation affecting the banks is not limited to Nigeria and that there is no cause for alarm.
“Indeed Nigerian banks are doing much better than those in other commodity exporting and emerging economies. The ability of banks to withstand dwindling incomes and harsh conditions is not limitless.
“With growth picking up and the improvements in the Forex market we are confident that we will sail out of this troubled waters soon,” he explained.
How ERGP Will Restore Economy
To restore confidence and underscore the determination of this administration in taking the country out of recession, the much awaited Economic Reform and Governance Project, ERGP has finally been launched.
Udoma Udo Udoma, Minister of Budget and National Planning, at the official launching of the ERGP in Abuja disclosed that: “The Plan articulates up to 60 interventions, and initiatives, that must be executed and/or completed within the next four years to tackle and remove, impediments to growth; to make markets function better; and to leverage the power of the private sector.
However, this growth is to be achieved without compromising the core values of this nation, such as discipline, integrity, social justice, self- reliance and patriotism. And, of course, all the initiatives in the plan will be implemented in such a manner as to continue to strengthen and promote national cohesion and social inclusion.
“Even though the ERGP outlines up to 60 initiatives, it focuses on five execution priorities, which are central to achieving the 7 per cent growth projected by the end of the Plan period”, he said.
He however highlighted key areas including achieving Agriculture and Food Security; Expansion of Energy Infrastructure capacities (power and petroleum); Improving Transportation Infrastructure and Driving Industrialization principally through local and small business enterprises.