• Govt laments $2.8b capital flight over importation of ICT wares
• Customs probes discharge of oil, gas cargoes at terminals
Stakeholders in the financial market have expressed worry about the poor handling of sensitive issues in the economy by government, particularly with regard to the lingering fuel scarcity and foreign exchange needed to import the commodity.
The implications, besides the foreign exchange-related pressure on the economy so far, are the aggregate value of man-hours lost at the fuel stations and the attendant high cost of basic needs.
Meanwhile, the stock index provider, MSCI World, is currently seeking feedback from investors on the ease of access to the Nigerian equity market, in a move that could finally lead to the exclusion of the nation’s bourse from MSCI’s Frontier Markets index.
The MSCI World is a stock market index of 1,631 ‘world’ stocks maintained by MSCI Inc. and used as a common benchmark for ‘world’ or ‘global’ stock funds that attract investors.
Besides, the Federal Government has expressed worry about the increasing apathy towards locally made Information and Communications Technology (ICT) products, especially the hardware. The government said it had discovered that Nigeria loses about $2.8 billion to the importation of hardware yearly.
In the same vein, following persistent protest from some facilitators of Free Trade Zones (FTZs) against alleged ‘ monopoly’ in the Nigerian oil and gas logistic supply services, the Nigeria Customs Service (NCS) has announced plans to carry out an investigation.
The continuous delay in the implementation of the 2016 budget and the dark cloud around the possibility of implementing the figures due to poor earnings’ profile of government are also critical challenges that the economy and the administration stand to battle with.
Analysts at Afrinvest Securities Limited told The Guardian at the weekend, however, that to pull the system out of the current economic challenges, the time had come for the administration to review its approach to solving the lingering energy crisis in the country, together with its foreign exchange component.
In a statement issued last week by MSCI World, according to Reuters, the consultation followed the introduction of restrictions on foreign currency trading, saying that it would make public its decision on or before April 29.
With Nigeria in the throes of severe economic crisis due to the falling crude oil price, which reduced foreign exchange earnings, the apex bank decided to peg the currency and introduce curbs to protect reserves that are now at 11-year low at $27.67 billion.
The restrictions have been a long-drawn battle between the financial system regulator and the local/foreign portfolio investors, with JPMorgan delisting the country from its Government Bond Index-Emerging Markets.
MSCI said that the ease of capital inflows and outflows was one of the key criteria in its market classification framework- foreign exchange, which specifically appears to be the major issue cited by JPMorgan.
“Introduction of restrictive measures, such as capital or foreign exchange controls, which can lead to material deterioration of equity market accessibility, may result in the exclusion of such market from the MSCI Frontier Markets Indexes and a reclassification to Standalone Market status,” it warned.
The Global Chief Economist at Renaissance Capital, Charles Robertson, said the possibility that Nigeria might lose its place in the index had been a risk since it was excluded from key bond indices by JPMorgan and Barclays last year.
“Now the risk has become acute. Being excluded would create a higher hurdle to attracting future investments, as there would be no need for passive frontier market funds, which track the MSCI index, to hold Nigerian stocks.”
However, the Head of Investment Research at Afrinvest, Ayodeji Eboh, said: “Deregulating the downstream oil and gas sector remains the most efficient option. The protracted challenges in the currency market require more creative solutions as the ongoing fuel scarcity cannot be isolated from the difficulty in providing foreign exchange for the importation of petrol to meet domestic demand.
“Apart from the continuous delay in the 2016 budget implementation, the government is yet to communicate a well-articulated economic plan to drive market expectation and stabilise the system. A plethora of progressive and reflationary monetary and fiscal policies need to be put in place.”
At the end of his tour of FTZs in Lagos, Comptroller General of Customs, Col. Hameed Alli (rtd), said the plan to investigate the alleged monopoly in Nigerian oil and gas logistic supply services was in line with the Federal Government’s resolve to promote fairness and transparency in the sector.
According to the customs boss, the alleged monopoly in an FTZ and its legal status are to be investigated and a decision taken at the end of the exercise.
He said: “President Muhammadu Buhari stands for fairness and transparency. The idea of change is to do business in the right frame of work. We will go back and look at the law that exists. If we find any act of injustice, we will address it.”
The chairman of Jagal Group, owners of Nigerdock, Anwar Jarmakani had during Ali’s visit to Snake Island Integrated Free Zone (SIIFZ) recently said Nigeria was losing between $3 and $5 on every barrel of oil produced, which according to him translates to $1.5 billion yearly to non-existent laws, which purportedly encourages monopoly in oil and gas logistics in the country
Jarmakani, who is the chairman of SIIFZ, explained that monopoly had destroyed Nigeria’s reputation in oil and gas logistics. According to him, dominant monopoly in Nigeria’s oil and gas, as well as supply services had existed for over 20 years “sabotaging the national economy, conspiring and working against any potential competitors, particularly against Snake Island Integrated Free Zone.”
Jarmakani added: “The monopoly has consistently used this non-existent law to coerce the industry and service providers into doing their bidding and thereby undermining the Nigerian economy. If this law indeed exists, the Federal Government of Nigeria would not have encouraged other critical players like SIIFZ to make a huge investment in this industry.”
The Minister of Communications, Adebayo Shittu who disclosed the huge capital flight in Lagos, at the weekend, at an event organised by the Association of Telecommunications Companies of Nigeria (ATCON) in his honour said the government looked to leverage the communication technology sector to solve the problem of unemployment in the country because the revenue from the oil and gas sector had been on a steady decline since early 2015. He noted: “Therefore every avenue that is bringing losses to the country must be blocked completely.”
Shittu who said government targets the creation of two million jobs in the next six months charged ATCON to come up with how best the sector could be useful in the current skill gap, stressing that he believed the country had the enabling environment and laws needed to foster the required growth.
Indeed, findings by The Guardian yesterday, revealed that on a monthly basis, about four million mobile phone units are imported into Nigeria.
An industry source, who preferred anonymity told The Guardian that in 2014 alone, about 24 million units of mobile phones were shipped into the country with smartphones accounting for 20 per cent.
Commenting on local content development, Shittu said he had observed that one of the major challenges to growing Nigeria’s ICT sector had largely been apathy towards indigenous products and services.
“Reports reaching me show that the country is losing about $2.8 billion yearly to the continued importation of ICT hardware and services as capital flights from the country.
“We would like to see international brands establish factories in Nigeria or partner any local operators or buy components of their systems that are produced by local manufacturers as well as maintaining in-country research and development departments for the purpose of product conceptualisation, innovation, adaptation and design development.
“The local content development policy would be implemented to protect indigenous players in the industry and the ministry would galvanise the right policies that would see to the need of Small and Medium scale Enterprises (SMEs),” he stressed.
Source: Guardian Newspaper.
