By Kenneth Jukpor
· Non-oil exports suffer amid FX gains from crude oil export
· Miners to form large conglomerates, enhance GDP contribution
The federal government’s propensity to devalue the naira has been strongly criticized by finance experts and exporters, despite assertions by the Central Bank of Nigeria (CBN) that naira devaluation has led to more foreign direct investments (FDIs) and supported export.
While the apex bank opines that the devaluation of naira created economic buoyancy that increased FDI in the country by $1563.64million in the second quarter of 2021, economic analysts have dismissed this claim as misleading.
Despite the over $130billion deployed by CBN to defend the naira and a myriad of policies churned out to shore up its value over the past six years, the Nigerian currency has depreciated by over 200%, sliding from N196.99 to a dollar in December 2015 to N412.06/$ in September 2021.
The depreciation is even higher at the parallel market with one dollar which sold for about N230 in December 2015 now going for almost N550 presently.
Although Nigeria’s export sold at N5.08trillion in the second quarter of 2021 according to the National Bureau of Statistics (NBS), non-oil exports only accounted for N462.85billion representing 9.1% of total exports for the period under review.
Efforts by our correspondent to obtain stats that validate FDI projections as claimed by CBN were futile.
However, the Executive Secretary of the Presidential Enabling Business Environment Council (PEBEC), Dr. Jumoke Oduwole noted that Nigeria has retained its spot as the third most attractive country in Africa for foreign investment in 2021.
Oduwole shared a report by the Absa Africa Financial Markets Index 2021 (AAFMI) with our correspondent. The report surveyed 23 countries in Africa and used six pillars to rank their openness and attractiveness to foreign investment. It also ranked Nigeria third in its 2020 survey.
According to the 2021 report, Nigeria scored 63 points to occupy the third position while the first and second positions went to South Africa and Mauritius, which scored 86 and 70 points, respectively.
“Nigeria continues to make strides in creating an enabling investment environment for foreign investors, with the necessary regulatory developments and policy initiatives.” the report reads.
The report highlighted Nigeria’s performance across the six pillars used in the survey: market depth, 62; access to foreign exchange, 20; market transparency, tax and regulatory environment, 86; capacity of local investors, 44; macroeconomic opportunities, 69 and enforceability of the standard master agreement, 100.
Speaking with MMS Plus on the possibility of naira devaluation enhancing FDIs and exports in the nation, an economic expert and member of the Nigerian Economic Summit Group (NESG), Dr. Ikenna Nwosu asserted that it doesn’t make economic sense to believe that investors would be attracted to a nation on account of its devalued currency.
His words: “The CBN governor may have made his claims but I doubt if there are statistics to support this case on the devaluation of the naira. Nigerian Investment Promotion Council (NIPC) is in a better place to measure the growth of investments in the country and they are also in a position to explain the reason for the increase or decline in investments.”
“I don’t see how any company or business investor would come into this country simply because the naira has been devalued. It doesn’t make any sense, let alone economic sense. The forex changes are determined by market forces and the value could change at any time and change the dynamics of any investment made on the premise of devaluation. Multinationals can’t use devaluation of naira as a basis for investing.”
Despite the higher exchange rate for dollars acquired via exports, the fiscal expert opined that export is also hampered by the devaluation of naira.
“I will suggest that the Nigerian Export Promotion Council (NEPC) should be contacted to know the growth or decline of non-oil exports in the period under review. NEPC is in charge of export, so it is also in the best position to explain reasons for its decline or growth. CBN has become fond of making policy statements on areas beyond their mandates. This isn’t right because NIPC and NEPC are government agencies that have specific mandates on these issues,” Nwosu said.
Meanwhile, an export champion and Executive Secretary of the Institute of Export Operations and Management (IEOM), Mr. Ofon Udofia lamented that export in Nigeria in the last one year hasn’t been good.
“Although the Covid-19 situation also compounded the problems, there are lots of infrastructure deficits that hamper exports. Recall that the recent visit of the President of African Development Bank and the Director General of World Trade Organization (WTO), Dr. Ngozi Okonjo-Iweala visited the Nigerian President, Muhammadu Buhari, they stressed that the cost of doing business is too high in the nation.”
“The issues responsible for the high cost of doing business are numerous and it includes the activities at the ports, seaports and airports. The Nigerian Export Promotion Council (NEPC) has tried as much as it could via incentives to exporters but we still have numerous challenges at the ports, in terms of infrastructure and other areas. Beyond devaluing the naira, there are other technical barriers to trade and these issues have to be addressed.”
“Nigeria has to transform its certification process, highly hazardous and critical control points, issues that affect food, among others. No nation wants to import items from Nigeria that would endanger the lives of its citizens. There are lots of issues and I don’t like to only talk about the problems. We also have to talk about the potentials and the processes to solve the problems so that more people don’t run away from exports,” he said.
While commending the government for its concern about exports, he said he is usually excited by the drop in crude oil prices because it spurs the government and investors to think non-oil exports, however, he lamented that as soon as there is a boom in oil people immediately start to gravitate to oil business at the expense of agriculture and other non-oil export trade.
In another development, Nigerian investors in mining have been encouraged to form large conglomerates in a bid to grow their businesses and increase the sector’s contribution to GDP which is currently at 0.5%.
Leading stakeholders in mining and stock exchange veterans made this call at a virtual summit organized by Women in Mining (WIM), last week when the group held its 5th Digital Training Series.
Speaking at the conference, the Managing Director of Nigerian Capital Market Institute, a subsidiary of Security and Exchange Commission (SEC), Mr. Emomotimi Agama stressed that there is no mining company listed on the Nigerian Stock Exchange.
Agama argued that the absence of mining companies from the exchange market deprives miners of an opportunity to expand their businesses, opining that the operators could form large conglomerates that would become a force to reckon with in the sector and the economy at large.
“It is time for miners to create a viable spot market and buying centres for themselves. This is a prerequisite before we talk about venturing into the more complicated stock exchange market. Price discovery is unknown in this sector and there is no price risk management because of fluctuations. import and export competitiveness can’t be attained also. These are core issues to be addressed in the nation’s mining sector.” He said.
The Exchange boss also called on dealers to comply with the ISO standards and ensure that their products meet global best standards.
Also speaking at the summit, Prof. Bankole Ako encouraged the miners to seek to add value to their products, noting that value addition would maximize their profit and create valuable employment opportunities in the nation.
Prof. Ako also encouraged the operators to diversify in a bid to minimize their risks with the sector bedeviled by uncertainties.
On her part, the Founder and President of Women in Mining, Engr. Janet Adeyemi said that the group is committed to get more young Nigerians involved in mining, adding that a project known as ‘Girls for Mining’ has already been held in Taraba, Osun and Plateau states.
According to her, WIMIN believes that one major way of reaching out to individuals to fully grasp the concept of mining and the technicalities involved is through capacity building and knowledge sharing.