Analysts Examine Prospects for Optimizing Choices for Growth in 2021

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Sunday, January 17, 2021 / 08:09 PM /Nifemi Taiyese for WebTV /Header Image Credit: WebTV

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Arbiterz, a business magazine, started its webinar series for the year 2021 with a maiden edition addressing "The Naira in 2021, Optimizing Choices for Growth", the webinar was conducted in partnership with Cordros Capital, Eagle Global Markets and The Association of Bureau de Change Operators of Nigeria.


Mr. Abimbola Agboluaje Founder, Arbiterz in his opening remarks highlighted that fiscal and monetary policies are important to investment growth and job creation.


Giving the opening remarks, Mr. Femi Ademola, Group Executive Director Cordros Capital stated that the webinar was timely of value. Ademola emphasized that the conference was topical and sought to provide solutions to currency issues and fluctuations in the country as opposed to laying complaints and pillorying policy makers.


"The pandemic has brought the global economy to its knees, and Nigeria suffered the shock combined with the crash in oil prices has dragged the economy to a second recession within five years, that has led to several consequences on the local currency" he said.  


Mr. Charlie Robertson, Global Chief Economist Renaissance Capital and keynote speaker in his presentation mentioned that due to the COVID-19 pandemic, there have been unprecedently quick monetary and fiscal stimulus. He noted that the major development from the crisis was the increasing debt level of western nations coupled with the yields that have fallen at the moment.


According to him the naira rate depends on inflation, and if Nigeria as a country continues to have high inflation the currency will weaken.


Robertson said that contrary to the hysteria about "too much debt" the emerging markets are well placed to borrow much more in the next decade.


The Global Chief Economist of Renaissance Capital, stressed that the underlying problem for Nigeria is a shortage of local savings, which is due to the high fertility rate. He emphasized that the frontier market local interest rates are likely to remain at around 10% due to the shortage of local savings. Giving the example of Morocco which he said had a lower fertility rate (less children born per family), with a large banking system, savings can grow.


Speaking on the outcome of the 2020 USA Presidential elections he said "Biden's victory should result in a shift in global foreign direct investment flows and this should change the dollar trajectory. Emerging markets do well when the dollar weakens", Charlie Robertson said.


For the 2021 outlook, from his presentation he showed that industrialization is expected in the parts of Nigeria where adult literacy is high and where electricity supply is secured, giving examples of states like Lagos, Abia and some other states in the South which are most likely to outperform, however financing for growth will remain constrained with the currency policy that is presently in place.


Giving further insight he said portfolio investors make more money when they invest in emerging markets if the dollar weakens and this creates a virtuous circle.


For Renaissance Capital, he said the expectation is that Nigeria's GDP recovery will average between 1% and 2% in the coming years.


The silver lining according to him for sub-Saharan countries, is that the presence of big agricultural sectors will enable growth and boost GDP.


He advised the government to face the underlying problems, and embark on wise investments that will aid economic growth and not pursue political ambitions.


In a panel session Mr. Bismarck Rewane, CEO Financial Derivatives Company, said the 2017 to 2019 broad macroeconomic thrust of Nigeria was based on economic patriotism, import substitution and defending the naira.


He stressed that the policy making mentality in Nigeria is changing towards one of being compliant. Rewane said Multi-lateral agencies are becoming much more assertive in their policy influence globally. 


He said economic patriotism means strong a naira, but a strong economy is a fallacy. The government according to him needs to accept that a strong naira does not mean a strong economy, and a strong economy will lead to a strong naira.


The economist noted that there will be a shift towards a market determined exchange, and pointed out the need to accept flexible rates and the need to stop the rationing of foreign exchange.


On the AfCFTA  he said farmers, financial service providers, and manufacturers would have to be cost competitive and quality service competitive which would change the mentality of local producers.


"There is no way to achieve growth as a nation if there is no national savings and investment growth" Rewane said.


He added "Cumulatively, we are seeing policy changes taking place, but policies such as the nation growing faster than population growth rate/control population and total factor productivity needs to be addressed to attain growth". 


Akinbamidele Akintola, Head, SSA Equity Sales, STANBIC IBTC was of the opinion that he does not believe that the monetary authorities are inclined to move the currency above N420/430 to $1. He warned that the implications of massive devaluation of the currency would lead to further problems on the fiscal side of policy. 

Speaking on inflows, he was of the view that flows into equities market should be driven by local investors as opposed to foreign investors.


Mr. Muda Yusuf, Director-General, Lagos Chamber of Commerce & Industry (LCCI) in his contribution highlighted the major challenges that the business community faces which include;

  1. Depreciation of the currency which could cause dislocations in the system and affect business margins and sustainability.
  2. A liquidity crisis in the foreign exchange market which could create uncertainty.
  3. Excess focus on the demand management side of the foreign exchange market with no clear strategy to encourage more supply into the system.

He called for the normalization of rates which would put transactions on the table rather than under the table. 


Mr. Aminu Gwadabe the President, Association of Bureau De Change Operators of Nigeria, in given his opinion on the country's exchange rate management said the association was a critical stakeholder in the foreign exchange market. He said that the CBN addressed the issue of third-party invoicing.


According to him the CBN has been proactive in ensuring a shift from demand management to supply management in ensuring inflows. As a country he advocated for decisions that will bring capital growth and investments through a change in mindset which would help the fortune of the naira in 2021.


Abiola Adekoya, a Lead Wealth Advisor, noted that investors were tilted towards more structured products, as they are being more cautious than before now. For most investors it is about wealth preservation, diversifying their portfolio and hedging naira portfolio.


"In 2020 there was a spike in local investors eyeing foreign markets. Foreign ETFs have become popular. Some platforms have made it easy for people to invest using naira, so they do not worry about conversion risk. Technology has helped financial services providers to make more products and services available to the public across various classes of investors and assets" she said. 

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