Africa Press-Nigeria:<\/p>\n
\u2022CBN says situation happening worldwide due to Covid-19 and under control<\/p>\n
James Emejo in Abuja, Dike Onwuamaeze and Chris Uba in Lagos<\/p>\n
The Central Bank of Nigeria (CBN) has urged Nigerians not to fret as the total value of capital importation into the country fell drastically to $1.29 billion in the second quarter of the year (Q2 2020), compared to $5.85 billion in the preceding quarter.<\/p>\n
The capital importation figures for Q2 2020, released yesterday by the National Bureau of Statistics (NBS), showed a contraction of 78 per cent compared to Q1 and by 79 per cent when compared to Q2 2019.<\/p>\n
Speaking with THISDAY, the Director, Corporate Communications, CBN, Mr. Isaac Okorafor, said the loss of foreign portfolio flows in Q2, though unfortunate for Nigeria, was no peculiar to the country.<\/p>\n
Okorafor explained that since the fourth quarter of 2019, all emerging markets had been recording drop in capital inflow, adding that the Nigerian challenge is also being experienced globally due to Covid-19, and under control by the CBN.<\/p>\n
\u201cThe oil producing countries lost flows because of the drop in oil prices from around the fourth quarter of 2019. But this became worse during the first and second quarters of 2020 as a result of the COVID-19 pandemic.<\/p>\n
\u201cFrom charts made available by the Institute of International Finance, a global body which tracks capital flows, you will see that India, China, Turkey, South Africa, Nigeria and other emerging markets have lost large sums of flows. These investors actually recalled flows and have kept them in their own vaults, waiting to see when things eventually settle. Also, we can see that growth has decelerated in practically all economies of the world.<\/p>\n
\u201cToday, there is recession in the United States, England and indeed in China.<\/p>\n
So, COVID-19 has had its impact on growth and the drop in crude oil prices has had its impact on not only flows, but also on growth. We believe that as the uncertainty in the global economy due to the pandemic reduces, flows would pick up,\u201d Okorafor said.<\/p>\n
Data from the Institute of International Finance showed that COVID-19 triggered non-resident portfolio outflows of around $90 billion from across emerging market countries in Q1 and Q2 of 2020.<\/p>\n
The fall in inflows was more significant between March and April 2020. This was sharper and deeper than any other stress episode, including the global financial crisis. While outflows reduced, emerging market countries have not witnessed significant inflows and equity flows are still down about $55 billion, the data from the global body showed.<\/p>\n
For Nigeria, according to the NBS\u2019 Capital Importation, Q2 2020 report, only six states of the federation, namely Lagos, FCT, Anambra, Kano, Niger and Ogun attracted capital inflow, leaving 31 others without value in terms of foreign investments, during the period.<\/p>\n
Lagos maintained its lead as the top destination of capital investment in Q2 with $1.13 billion or 87.30 per cent of the total investment during the period.<\/p>\n
The FCT recorded $145.30 million, Anambra $1.16 million, Kano $0.13 million, Lagos $1.13 billion, Niger $6.86 million and Ogun $11 million.
\nAccording to the NBS, \u201cother investment types\u201d accounted for the largest capital inflow with $761.03 million or 58.77 per cent of total capital imported.<\/p>\n
This was followed by portfolio investment, which accounted for $385.32 million, representing 29.76 per cent of inflows, while Foreign Direct Investment (FDI), which accounted $148.59 million or 11.47 per cent of total capital imported within the review period.<\/p>\n
Capital importation by shares dominated the Q2 results with $464.57 million.
\nHowever, among the top 10 investors, the United Kingdom maintained its lead as the top source of capital investment to the country with $428.83 million or 33.12 per cent of the total capital inflow in Q2.<\/p>\n
Investment from South Africa accounted for $149.29 million, United Arab Emirates (UAE) $145.15 million, the Netherlands $141.30 and Singapore $137.40.
\nOthers include United States $126.08 million, Hong Kong $33.78 million, British Virgin Islands $24.27 million, China $21.48 million and Mauritius $16.53 million.<\/p>\n
The NBS further stated that Standard Chartered Bank Nigeria Limited emerged at the top of capital investment with $425.21 million, representing 32.84 per cent of total capital inflow in Q2.<\/p>\n
NECA: New Policy on \u2018Form M\u2019 will Cause Disruption to Businesses<\/p>\n
In a related development, the CBN said it has received the request by the Nigeria Employers\u2019 Consultative Association (NECA) for dialogue on its latest policy which phased out the opening of Forms \u2018M\u2019 whose payment are routed through a buying company, agent, or other third parties.<\/p>\n
\u201cWe have received the letter from NECA and we would meet with them (NECA), but the point is that it is unlikely that we are going to shift ground,\u201d Okorafor said.<\/p>\n
NECA said in a letter to the CBN Governor, Godwin Emefiele, that the apex bank\u2019s directive did not take into consideration the impact on business drivers of central procurement by manufacturing companies, challenges to immediate access to final supplier companies, noting that manufacturing operations are at risk of business disruption, potential to worsen the impact of COVID-19 pandemic on the real sector and that it was necessary to have government\u2019s crackdown on abuse of procurement companies.<\/p>\n
The association, therefore, called for a meeting with the CBN governor to further engage on this matter in the interest of finding solution that would not negatively impact businesses or the economy.<\/p>\n
The letter , which was signed by the Director-General of the association , Timothy Olawale said: \u201cWe take this opportunity to commend the Federal Government on its various policies aimed at ensuring the growth and development of the Nigerian economy.<\/p>\n
\u201cWe have also noted the recent CBN directive to all authorised dealers on Forms \u201cM\u201d, which is intended to ensure prudent use of Nigeria\u2019s foreign exchange resources and eliminate incidences of over invoicing, transfer pricing, double handling charges and avoidable costs that are ultimately passed to the average Nigerian consumers.<\/p>\n
\u201cHowever, it is imperative to note the following downside of the policy which has the potential to frustrate the ongoing efforts of government to return the economy to growth, create jobs and prevent an impending economic downturn already worsened by the COVID-19 pandemic.\u201d<\/p>\n
According to NECA, the directive ignored the business drivers of central procurement by manufacturing companies, adding that, \u201cin order to optimise operating costs, manufacturing companies in Nigeria with global operating companies find it essential to source for production inputs and services through a centralised procurement process.<\/p>\n
\u201cThis structure enables the purchase of goods and services at competitive prices, leveraging the economies of scale. Without this structure in place, many of such companies in the current global recessionary times would have run aground.<\/p>\n
\u201cSecuring lower prices through centralised procurement has significantly contributed to the stability and resilience of their business operations in the face of global economic downturn. The benefit of the cost savings realised are shared by the multinationals\u2019 operating companies, which serves to reduce pressure on Nigeria\u2019s Forex reserve and ultimately the pricing of goods to the consumer.<\/p>\n
\u201cThe directive also poses challenges to immediate access to final supplier companies. Central procurement companies play an essential role as a buffer during periods of foreign currency shortages, without which multinational businesses would find it challenging to sustain their operations.<\/p>\n
\u201cThe procurement companies enable manufacturing companies to receive goods and services from final suppliers, which most companies would not ordinarily be able to access, due to the wide spectrum of parameters required by these suppliers or restrictions imposed by some original equipment manufacturers.<\/p>\n
\u201cThe procurement agencies further support business continuity by purchasing, on behalf of Nigerian companies, and allowing for extended payment timelines, giving credit in periods of foreign currency scarcity. Without these credit provisions, Nigerian companies would not be able to meet the advance payments required by final suppliers, amongst other requirements,\u201d said NECA.<\/p>\n
Olawale said: \u201cUnfortunately abuses can occur even with the most genuine processes. Sadly, over-invoicing, mispricing and multiple handling charges are some untoward practices by unscrupulous elements seeking to undermine Nigeria\u2019s foreign exchange reserve.<\/p>\n
\u201cHowever, not all manufacturing companies that use central procurement agencies are in any way involved in such practices, nor would abuse the opportunities that the process affords. Furthermore, these reputable companies that contribute significantly to Nigeria\u2019s GDP and support economic stability appreciate the gains of the resultant increase in productivity and indeed their own business continuity.<\/p>\n
\u201cWe recognise the urgent need in the globally challenged economic climate to eliminate any abuses of our foreign exchange reserve. However, we must stress that an all-encompassing or blanket ban on centralised procurement will have significant negative impact on businesses and the economy.<\/p>\n
\u201cNECA appreciates the intention of the CBN to introduce a Product Price Verification Mechanism to forestall over-pricing, and\/or mispricing of goods and services imported into the country and is committed to collaborating with the CBN in any way practicable, to ensure this objective is fully met without jeopardising business continuity for member-companies.\u201d<\/p>\n
OPS Calls for Policies to Improve FDI<\/p>\n
Meanwhile, representatives of the Organised Private Sector (OPS) in Nigeria have stated that the report of the NBS, showing fall of foreign capital flows did not come as a surprise.<\/p>\n
These representatives of the OPS, namely the Lagos Chamber of Commerce and Industry (LCCI), the Manufacturers Association of Nigeria (MAN) and the Nigerian Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), in separate interviews with THISDAY yesterday, attributed the decline to the impact of COVID-19 on the global economy, Nigeria\u2019s macroeconomic situation, poor domestic policies of the Nigerian government, the management of the country\u2019s foreign exchange market, the slump in the international oil market and the country\u2019s risk investment environment.<\/p>\n
The Director General of LCCI, Dr. Muda Yusuf said that it would not be a surprise that an oil-dependent economy like Nigeria\u2019s would experience such decline at a time like this due to the slump in the crude oil market and the general macro-economic situation of the country.<\/p>\n
Yusuf pointed out that though a large percentage of FDI into Nigeria goes into the oil and gas sector, \u201cthis sector is plagued with slump in oil price and policy uncertainty.\u201d<\/p>\n
He noted that the situation was not helped by the fact that foreign investors find it difficult to take their profits out of the country because of its foreign exchange market management.<\/p>\n
\u201cGovernment has to tidy up the foreign exchange management framework in other to inspire confidence that if you bring in your money at a very good rate you will also take it out easily. \u201cThis is a very critical factor. Moreover, we need to mitigate the risks in the investment environment like political, policy and security risks because they determine investment decisions,\u201d Yusuf said.<\/p>\n
Similarly, the Acting Director-General of MAN, Mr. Ambrose Oruche said it was glaring that most pronouncements or inactions of some government agencies scare away foreign capital inflow into the country, apart from the uncertainties created by COVID-19 that made investors to withhold their money and watch national economies.<\/p>\n
Oruche said: \u201cNigeria used to be a good investment destination but it is doubtful to say that we remain so currently because of policies that view repatriation of profit as round tripping. It is not sustainable that government will wake up and close the borders, which caught our members that have manufactured products to export off guard. This cannot attract genuine foreign capital investment into the country.\u201d<\/p>\n
According to the Director General of NACCIMA, Ambassador Ayo Olukanni, the lesson from the decline of foreign capital inflow is that Nigeria has to focus on local resource mobilisation by introducing policies that would increase productivity and enhance consumers\u2019 purchasing powers in order to reflate the economy.<\/p>\n
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Africa Press-Nigeria: \u2022CBN says situation happening worldwide due to Covid-19 and under control James Emejo in Abuja, Dike Onwuamaeze and Chris Uba in Lagos The Central Bank of Nigeria (CBN) has urged Nigerians not to fret as the total value of capital importation into the country fell drastically to $1.29 billion in the second quarter […]<\/p>\n","protected":false},"author":62,"featured_media":8947,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,15],"tags":[347,503],"class_list":["post-29279","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-abuja","tag-cbn"],"yoast_head":"\n