IFC launches new platform to mobilise $5bn for infrastructure in Nigeria, othersLawmakers demand Emefiele’s sack over falling Naira
Chika Amanze-Nwachuku and Obinna Chima in Washington DC and Damilola Oyedele in Abuja
The International Monetary Fund (IMF) has warned that the decline in Nigeria’s economic growth, if not reversed timely, may have a spillover effects in other economies in West Africa.
IMF’s Assistant Director/Head, Fiscal Policy and Surveillance, Catherine Pattillo, said this while responding to a question during a media briefing on the Fiscal Monitoring Report at the ongoing IMF/World Bank meetings in Washington DC.
In another development, several members of the House of Representatives have called for the removal and replacement of the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, for the continuous depreciation of the Naira.
The Nigerian economy is in recession. The National Bureau of Statistics (NBS) recently revealed that the country’s GDP contracted by 2.06 per cent in the second quarter of 2016, compared to the negative growth of 0.36 per cent recorded in the first quarter of 2016.
“As you know, Nigeria is a very important economy in the region and its success has positive spillover for the region, particularly in West Africa and its challenges then creates difficulties for its neighbours,” Pattillo said.
She pointed out that the slump in oil production and slow growth had created challenges for the economy, saying that one statistics that was quite striking to her was the interest payment of more than 45 per cent of federal government revenue to debt servicing.
She advised the fiscal authorities to prioritise and safeguard “fiscal sustainabilit, which means, implement to increase non-oil revenues and implement an independent price-setting mechanism that minimises fuel subsidy. “So, these are two priorities, while also of course, improving public service delivery so that citizens can see the benefits of good governance and services financed by the government,” Pattillo added.
On his part, the Director, Fiscal Affairs Department, IMF, Vitor Gaspar, noted that looking at the global debt and deficit landscape in the world, “you’ll see that the countries that have the highest public sector deficit are oil exporters.”
“Nigeria is in debt group is a country that was very much hit by very low oil prices. That is a general message because it applies to oil exporters in general, the group of oil exporters have shared some characteristics.
“The most important point in my view of general relevance is that for countries in sub-Saharan Africa to deliver on Sustainable Development Goals (SDGs) for most of them, the key challenge is the building up of revenue mobilisation capacity through tax capacity building, that’s a key priority.
“These countries must improve their capacities to raise revenue, and why is that so? Because there is such need in term of public infrastructure, there is such need in terms of public education, there is such need in terms of health. For these groups of countries, public finance, fiscal policy is part of the overall development strategy, and in that, tax capacity is a fundamental cornerstone,” the IMF official added.
Meanwhile, International Finance Corporation (IFC), a member of the World Bank Group wednesday launched an innovative programme that aims to raise $5 billion from global institutional investors. The fund will be used to modernise infrastructure in emerging markets over the next five years, opening up a new stream of capital flows to improve power, water, transportation, and telecommunications systems in developing countries.
The initiative, called MCPP Infrastructure, builds on the success of IFC’s Managed Co-Lending Portfolio Programme, a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio. In its first phase, the programme allocated $3 billion from the People’s Bank of China across 70 deals in less than two years. It demonstrated how large investors can benefit from delegating the processes of deal origination and approvals to IFC.
The first partnership under the program was signed with the global insurance company Allianz. Under the agreement, Allianz intends to invest $500 million, which will be channeled into IFC debt financing for infrastructure projects in emerging markets. IFC is also in advanced discussions with Eastspring Investments, the Asian asset management business of Prudential, for a commitment of $500 million. Similar discussions are being conducted with AXA, also for a commitment of $500 million.
MCPP Infrastructure is designed for institutional investors seeking to increase their exposure to emerging-markets infrastructure. IFC will originate, approve, and manage the portfolio of loans that will mirror IFC’s own portfolio in infrastructure. It will do so in a manner agreed upfront with its partner investors, always subject to the overall governance of the platform.
“Modern infrastructure is essential for economic growth and lasting prosperity,” said IFC Executive Vice President and CEO Philippe Le Houérou. “Yet a huge investment gap exists in this sector—totalling trillions of dollars a year in emerging markets alone. MCPP Infrastructure marks a breakthrough in the search for large-scale financing solutions to the challenges of development. It is a key building block in the global effort to move from billions to trillions in development finance.”
Meanwhile,calling for the removal of the CBN governor, lawmakers at plenary yesterday accused Emefiele and his team of incompetence and inability to formulate viable foreign exchange policies.
Calls for his sack followed a motion of urgent national importance titled “call for investigation of the CBN’s forex policies” sponsored by Hon. Ali Isa (Gombe PDP).
The weekly reports of forex sale to Bureau de Change (BDCs) and commercial banks by the apex bank, show the Naira on a steady decline against the Dollar and Pound Sterling, Isa noted.
This, he argued, has contributed to the worsening economic situation of the country.
Backing the call for the immediate sack of the CBN Governor, Hon. Mojeed Alabi (Osun APC) said the forex policies have worsened the situation, rather than ameliorate it.
These are cases of policy somersault and abuse of processes, Alabi said, and added that Emefiele’s inability to manage the situation signals to a need for his removal and replacement.
The lawmaker further noted that Emefiele has always shunned invitations of the relevant House committees who invited him for sit downs on how to reverse the decline of the local currency.
Hon. Raji Olawale (Lagos APC) echoed the sentiments of his colleagues demanding Emefiele’s sack.
The Minority Leader, Hon. Leo Ogor, however disagreed with the call for Emefiele’s removal and advocated that the legislature and executive arms of government work together to find solutions to the forex crises.
Adopting the prayers of the motion, the House resolved to set up an adhoc committee to interact with the BDCs and the commercial banks who receive forex allocations from the apex bank, to give detailed account of the utilisation.
The committee would also be expected to recommend appropriate measures that would stabilise the forex market and strengthen the Naira.