COVID-19; Nigeria Needs To Relax Foreign Exchange Management To Boost Industrialization - Dr. Yusuf

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Friday, April 24, 2020 / 8:10 AM / Bukola Akinyele for WebTV / Header Image Credit: Twitter; @mudashiru_yusuf

 

Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, has argued that the current economic and health crises provides the country the opportunity to liberalize its foreign exchange market to enable it attract foreign direct investments(DFIs) into the economy.


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He also spoke extensively on the impact of the COVID-19 pandemic on the businesses environment and the Manufacturing sector, he said that the impact of the pandemic on business can be broken into three segments, namely;  First, the issue of the lockdown which has pratically ground the economy to a standstill . According to him, there is a profound macroeconomic effect which has adversely affected growth in national output and productivity.


Looking at the critical indicators such as the nation's reserves and exchange rate, he noted that the economy is already leaning into a recession. Dr. Yusuf said the challenges facing supply chains had shown up as supply disruptions especially for foreign imports.


He said, the biggest challenge ahead would be macroeconomic spurred by falling international crude oil prices and the depreciation of the naira. The rise in the naira would lead to higher input costs and worsening domestic inflation.


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A review of the manufacturing sector suggests that higher import costs accompanying a fall in the external value of the naira would increase domestic production costs and likely result in cost push domestic inflation.


The  forex exchange liquidity challenge according to Muda, would be the consequence of declining Petro-dollar revenues and rising revenue uncertainty as oil prices continue to dip in international markets. The economist charged the government to  work with an economic management model of zero revenue from oil such that a non-oil based model for growing the economy would be adopted.


According to him, these are the critical issues bothering the business community at this time and how the policy makers will respond to them would determine the impact policy would have on the business environment in 2020.


As Small and Medium Enterprises are part of the key drivers of the economy, Dr. Yusuf said  the monetary policy or the monetary authority angle has been based on significant intervention in terms of palliatives. One of the complaints about the Central Bank of Nigeria (CBN) intervention funds is that the commercial banks are yet to on board disbursement and monitoring frameworks that encourage borrowing and enforce repayment. To soften the impact of COVID-19 on corporate businesses  some banks have already granted extended moratorium on credit to small businesses. Muda advised commercial banks to  show a lot more clarity in the way they approve across board concessions from commercial banks to the SMEs by extending credit repayment moratorium.


The LCCI boss also called on the CBN to relax its regulatory provisions for commercial banks in other to create room for the giving of concessions.


On the matter of import tariff, Yusuf believed that tariff levels is too high and it is part of the reason we have a high cost environment and an industrial sector that is not competitive . it is important that there is proper engagement between the policy makers, regulators and stakeholders in order to pin point what kind of intervention was necessary.


Yusuf was also of the view that the country needs to relax foreign exchange management, to allow private capital to come in, we need  fiscal policy, tax policy, monetary policy, forex policy, institutional issues, the Port process in order to enable businesses to be able to recover from Banks and contribute to the recovery recovery.


Dr. Yusuf while giving insight into manufacturing, he said industrialization is very key in turning around the economy. But what has not been done sufficiently over the years is that we have not developed our infrastructure which leads to the reason why we have not not been getting much from agriculture and industries.

 

Yusuf added that, there is a need for structural government around industrialization, more importantly is the issue of infrastructure and how Central Bank of Nigeria can help finance it.


Dr. Yusuf said, ways to solve the issues affecting industrialization in Nigeria is to have a holistic approach and understand the fundamentals on what can make industry strive.


In order to generate off takers for those in Agriculture sector, he highlighted such areas as:

  • Developing a linkages between agriculture and industry
  • Providing logistics from farms to the market
  • Providing facilities for storage and more importantly
  • Creating processing in order to easily process goods produce. 


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