Financial analysts say the Nigerian government’s planned partial privatisation of the Bank of Industry, is a commendable development that will make available more funds for development of the economy.
The Chief Executive Officer of the Cowry Asset Management Limited, Johnson Chukwu, told Channels Television on Friday that the bank was limited in terms of funding due to the poor capacity of the government to provide funding.
He further said that the planned partial privatisation did not come as a surprise, as the bank had over the years showed signs of limited access to funds.
Mr Chukwu explained that the development would enable the institution attract private capital that could enable them expound their coverage area.
“The capital will enable them increase the number of customers that they can attend to. They are constrained by the fact that they cannot access private capital,” he said.
The head, Development Finance, Heritage Bank, Segun Akanji, said that the privatisation would open a vista of opportunities, empowering the institution to create wider access to knowledge and competitiveness.
“At the moment the finance that is needed to push other institutions is not available and the partial privatisation will make the funds available,” he said.
Mr Akanji pointed out that the government should not be involved in activities that involve raising money for businesses development in any economy, but should only be involved in the control and policy making that could empower the system to function well.
The planned partial privatisation is one of government’s efforts to make more funds available for individuals to get access to loan form the institution.
The Central Bank of Nigeria has put in place modalities to introduce the cashless policy 30 states of the federation having completed phases 1 and 2 of the policy in six pilot states- Abia, Anambra, Lagos, Ogun, Kano, Rivers- and the Federal Capital Territory (FCT).
The CBN, in a notice by its Corporate Affairs Department to all stakeholders and the general public, said Phase 3 of the policy’s implementation would commence in the remaining 30 States of the Federation on July 1 as scheduled.
The apex bank also said it has mapped out modalities to ensure the cashless policy succeeds in other parts of the state as it did in the pilot states.
The Head, Shared Services at the Central Bank, Mr Chidi Umeano, who was a guest on Channels Television’s daily business programme, Business Morning, said the apex bank is doing all it can to deploy the needed infrastructure to support the policy.
According to him, the one year waiver of charges on withdrawals is one measure to give time for the infrastructure to be put in place.
He says the Central Bank has carried its sensitisation campaign to the rural communities and is still doing more to sensitise Nigerians.
The CEO, Cowry Assets Management Ltd, Mr Johnson Chukwu, who was also a contributor on the programme, said the cashless policy has benefited the economy in so many ways but urged the Central Bank to do more towards putting all that is needed in place to ensure its efficiency and success.
The CEO of Cowry Asset Management Company limited, Mr. Johnson Chukwu and Head, Development Financing, Heritage Bank, Segun Akanji, have reiterated the need to develop and finance the economy.
While speaking as guests on Channels Television’s Business Morning, they commended the CBN Governor, Mr. Godwin Emefiele, on his strategy to stimulate growth in the economy through increased employment.
They believe the introduction of a broad spectrum of financing for various sectors such as agriculture, small and medium enterprises amongst others is critical to the growth of the economy.
However, they are of the opinion that targeting predetermined sectors can create jobs on a mass scale and significantly reduce Nigeria’s import bills.
They also urged him to come up with appropriate incentives to empower innovative entrepreneurs to drive growth and development.
For the private sector to promote inclusive growth and job-creation, the Federal Government must be more proactive in creating business in enabling environments.
The CEO, Cowry Assets Management Limited, Mr. Johnson Chukwu, who was on Business Morning advocated the need to improve the quality of education in the country and recommended that skill acquisition should be a part of early learning.
He urged policy makers to come up with policies and initiatives to encourage private sector participation in developing the real sector.
According to him, if some major challenges hindering the smooth running of businesses are addressed, the private sector will be able to contribute more to economic growth and create more jobs.
He highlighted some of the challenges which include lack of adequate power supply, multiple taxation, poor transportation network among others.
Mr. Chukwu says this will help increase the competence of job seekers and reduce unemployment in the country.
Experts say that the recently announced rebasing of Nigeria’s GDP has only elevated the status of Nigeria in terms of economic size and not necessarily shown that there was more prosperity for Nigerians.
They noted that while this was a positive move and a great achievement for the country, it is just one of the steps needed towards developing the economy for the purpose of making measurable impact on the people.
Sunrise on Channels Television played host to the MD of Cowry Asset Management, Johnson Chukwu, who noted that the structure of the economy was the reason why the obviously well represented growth of Nigeria’s economy was not reflecting on the populace where there were still many Nigerians living in poverty.
He noted that Nigeria has kept producing more millionaires in recent years, showing that there was indeed growth but the wealth has not been made to spread evenly. He stated that there was need for the country to develop structures in sectors that would amount to job creation.
Financial Analyst, Odilim Enwegbara, who was also on the programme said that Nigeria’s economic growth was not real sector driven and Nigeria needs to redefine its growth.
He noted that the over-dependence of the economy on oil and gas remains one of the issues. He said; “show me any Nigerian billionaire that is not involved in oil and gas.”
He also emphasized the low level of development in the manufacturing sector in the country as a major issue. While acknowledging the positive impact the growth in some of the sectors would have on Nigerians, he noted that most of the businesses that have contributed to the celebrated growth were not indigenous companies run by Nigerians.
Reacting to Nigeria’s status as having become the largest economy in Africa, he took time to make a comparative analysis of the differences between South Africa and Nigeria in terms of economic indices which shows that South Africa remained ahead of Nigeria in terms of the quality of impact its economic state has on the people.
He cited the population of Nigeria as a major factor that makes the country’s economy demand better management.
The informal sector was also identified not to have been captured in the rebasing. Mr. Chukwu said that it would almost be impossible to capture all the petty traders and small shop owners in the calculations but he expressed confidence that the quality of work done on the exercise indeed took special focus on them, with an appreciable percentage of them captured.
He maintained an earlier stance that the rebasing was not expected to amount to more money for the average Nigerian, but its ability to attract more foreign direct investment to develop the local industries would eventually add value to the people through direct and indirect jobs.
Mr Enwegbara added that the rebasing was an exercise for the Government to know which sectors to focus on for the purpose of growing the economy and not one that the everyday Nigerian understands, let alone feel its direct impact.
He recommended the dire need for Nigeria to diversify its economy and solve the problem of power supply as the most important solution to the economic hardship that Nigerians were facing.
Speaking passionately on the need for the Nigerian authorities to take major decisions, he also mentioned other infrastructural deficiencies in the country as a major barrier to any form of growth being envisaged.
Mr. Chukwu on his part noted that the country cannot totally be independent as it was a consuming nation and it would need to encourage the availability of more businesses providing daily needs as seen in the establishment of shopping malls across the country.
He, however, warned that it was important for the Government to control this sector to ensure that the country imports less and exports more. He also advised that the Government creates a support mechanism for the very poor population in order to boost their consumption capacity and make them active players of the economy, as a strategy to create market for local industry.
He noted that what the best countries in the world do is that they focus on their areas of comparative advantage; something he acknowledged that the Government was doing through agriculture.
The hope of having Nigeria’s 2014 budget passed by the National Assembly any time soon may not be feasible until the first quarter of the year.
That was the opinion of two analysts, Eze Onyekpere and Johnson Chukwu who were guests on Channels Television’s programme, Business Morning.
They expressed worries that the budget, which ordinarily should have been passed for implementation before now, was still a subject of discourse at the National Assembly.
In Mr. Chukwu’s opinion, the delay in implementation will lead to a set back in the execution of key projects especially in the area of infrastructure.
He also urged the Federal Government to curtail the level of oil theft in the country, as it was a major factor capable of reducing output and export, thus constituting a bane on foreign exchange generation in 2014.
giving a breakdown of the budget, Mr Onyekpere pointed out that the sum allocated to some sectors such as the judiciary, agriculture, health and education was quite low.
He called for more funds to be made available to these sectors to push them forward.
Speaking on the CBN’s motive for designating 8 commercial banks as ‘too big to fail,’ the Director, Banking Supervision of the Central Bank of Nigeria, Mrs. Agnes Tokunbo-Martins said the named banks are systemically important to the economy as their failure could have far reaching effect on Nigeria’s financial stability.
The implications of the designation for the banks is that banks are permitted to have 50% off their capital as subordinated debts or loans but if considered systemically important, they are required to have a capital that is 75% common equity.
This is because common equity is considered to be higher loss absorbency.
In terms of liquidity: “you’d have to have about 5% above the regulatory minimum which is 30%. She added that the average banks have about 50%, so their pronouncement does not place extra burdens on the said banks.
The MD of Cowry Assets Management Limited, Johnson Chukwu, avers that there is no bank that is too big to fail but the CBN has only identified banks whose failure could affect the banking system.
“Any bank could fail if they don’t manage their risk asset portfolio very well or if there’s a major fraud,” he said.
The banks named ‘Too Big To Fail’ are First Bank of Nigeria, Guarantee Trust Bank, Skye Bank, Access Bank, Diamond Bank, Zenith Bank, United Bank of Africa and Eco Bank.
An Economic analyst Johnson Chukwu has said that the move to increase cash reserve deposits to 12% will cause a lot of instability in the banking sector. “Interest rate, deposit rate, fixed income and levy rates of these banks will be affected”, he added.
He said that the change will have a macro-economic impact on the economy of the nation and if the impact of capital market is delayed there will be reduction in bank earnings.
Mr. Chukwu said the central bank is trying to push in money to restore liquidity to the system to help boost it, meaning that the banks are forgoing incoming assets. Adding that Central Bank of Nigeria (CBN) has also moved ahead to try to moderate the impact of the liquidity.
“Banks are selling down their bonds to resell liquidity; these banks may be lurking losses on bonds. CBN governor has made exchange rate top priority trying to stabilize with the dollar. Deposit rates are being increased so that commercial deposits will have lower costs, some have as high as 8% interest rate,” he said.