Moses Emorinken, AbujaThe Central Bank of Nigeria (CBN) has revealed that 40 per cent of the total credits available in our economy, especially in the Capital and Money Markets, are from foreign holdings.This according to the apex regulator puts the economy of the country in a very precarious position as any withdrawal of such funds due to domestic factors could potentially wreak havoc on our economy.The Deputy Director of Financial Policy and Regulation Department of the CBN, Mr. Hassan Mahmoud, made this known during the workshop for business editors and correspondents organized by the Nigeria Deposit Insurance Corporation (NDIC) on Tuesday in Adamawa.He explained that the volume of foreign portfolio investments in our money market is well over $20bn.According to him, Of the total activities in the capital market, 40 per cent of them are from foreign holdings. Even in our money market too, substantial part of the foreign portfolio investments accounts for over $20bn.Over 40 per cent of total credit in the economy are in forex. So, anything that happens to the domestic economy will make this huge funds to go out; and when they are about to go out, it will be very devastating for the economy, given our level of external reserve, tools we have to manage exchange rates, and given the sensitivity of that exchange rate market.He further added: We see in some advanced economies a zero inflation rate. However, for some economies in the Europe area, we see inflation picking up. Even though we are getting out of import dependence, substantial part of our input or raw materials are still imported. Those hike in prices are going to feed into our domestic prices.Also, a lot of Nigerian corporate bodies, including government have borrowed from the international markets. Our total borrowings now are over $10bn; so we have huge exposure to international stock markets, and any developments in those markets will impact whatever value of investments and expectations that we have in those economies.Mahmoud explained that although our Gross Domestic Product (GDP) has improved especially considering where we are coming from, however, from where we are going to, we are far behind.The GDP as at today from the National Bureau of Statistics (NBS) is 2.28 per cent. However, if you look at pre-financial crisis period, it was about 6 to 7 per cent. Since the financial crisis started about a decade ago, we have not even added 200 basis points to our GDP growth. This is of great concern.READ ALSO:CBN appoints new Director Currency OperationsChina was doing 10 per cent, and have moved 7 to 8 per cent in less than ten years. Other emerging economies have surpassed their pre-crisis growth rate. However, if we are looking at the minus 1.9 per cent that we did in 2015 and 2016, and the 2.28 per cent growth rate in the third quarter of 2019, you will see that we have moved substantially, because it is more difficult to come out of recession than to sustain a positive growth rate.It is projected by the CBN that by the fourth quarter of 2019, we are going to be doing 2.38 per cent. The International Monetary Fund (IMF) is projecting close to 2.31 per cent. However, the government is actually projecting 3.1 per cent in the National Planning, given expectations from their Economic Recovery and Growth Plan (ERGP) initiative.Non-oil contribution to GDP is declining, even as oil sector contributed more to GDP growth. However, the concern is because of the volatility in the oil sector (if it is the driver of our economy), any shortfall from it will significantly distort our projections.However, the oil sector is still contributing less than 10 per cent to the GDP. The non-oil sector is still the major contributor to the GDP, which includes agriculture and manufacturing.In the last NBS statistics, while we saw that the contribution of the non-oil sector has increased significantly, the components of that non-oil sector also includes serviceTelecoms, IT etc.By the time you start seeing that agriculture which is the largest employer of labour or of which the largest population are engaged in is not bringing back the level of expected output, then you know that the number of people that are going to fall into the poverty line will increase substantially.
Click here to read full news..
