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