The Nigerian Employers’ Consultative Association has asked the Federal Government to emulate reforms that have helped countries with similar economic indices as Nigeria such as Ghana, Indonesia, Russia, Norway and Saudi Arabia.
The President of the association, Mr. Larry Ettah, said that the country’s rationing of scarce foreign exchange had produced FX market arbitrage and round-tripping, corruption, multiple exchange rates and discouraged investment.
He, however, urged the Central Bank of Nigeria to take the recent reforms to a logical conclusion through a floating exchange rate system.
For instance, he pointed out that Saudi Arabia’s response to declining oil prices was privatisation of five per cent of the national oil company, Aramco, and the diversification of its economy away from oil.
According to him, Ghana succeeded in resuming economic growth by devaluing its currency and benefiting from the International Monetary Fund loans.
The NECA president said that Russia allowed its currency to devalue following its economic crisis, enabling a natural market adjustment, preserving its reserves of almost $400bn, and consequently attracting foreign investors.
On reforms in Egypt, Ettah said, “Egypt announced it would float the Egyptian pound (devaluation). It also announced a fiscal reform programme. Egypt entered into a deal with the IMF based on a three-year plan.
“These measures led to the massive re-entry of foreign investors, who had fled the Egyptian economy due to its political and economic problems. The result was that Egypt’s $4bn Eurobond offer secured multiple over-subscriptions.”
While commending the government on the successful $1bn Eurobond, Ettah, however, expressed fears over the relatively high cost of the Eurobond offer and the rising debt service obligations of the country compared to Nigeria’s revenue profile.
He said, “The experience of Saudi Arabia illustrates the need for a proactive, strong and concerted policy response as oil prices began to fall. Unlike the Saudis, Nigeria is yet to articulate and communicate a coherent policy agenda in response to the oil crises.
“While we note positively that government has now formulated an Economic Recovery and Growth Plan in consultation with all stakeholders and with assistance from McKinsey, this step is perhaps two years late and should be implemented forthwith.
“We expect the ERGP’s implementation to be based on a strong agenda to diversify exports and government revenue sources; promotion of private capital and investment; deregulation of downstream petroleum; as well as an effective flexible exchange rate system.”
Following the three consecutive negative gross domestic product growth of -0.36 per cent, -2.06 per cent and -2.24 per cent in the first three quarters of 2016, the National Bureau Statistics recently reported that the economy contracted by -1.51 per cent between October and December 2016.
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