Over the past two months, developments in the nation’s domestic economy such as the recent Central Bank of Nigeria (CBN) and Peoples Bank of China’s (PBoC’s) currency sawp and lingering political economic crisis characterized by the lingering Executive-Legislature face-off on critical funding issues, have continued to elicit reactions from stakeholders from the issues’ cost-benefit analysis perspectives. In this interview with BRTNews editorial team, a banking expert and management consultant, Dr. Boniface Chizea, comments on these critical issues and their implications for the nation’s political economy. Excerpts:
Could you advice on how Nigerian businesses could explore the recent currency swap between the CBN and PBoC to optimize their operations for local and international markets competitiveness?
It is a matter for the records that both the Chinese Central Bank and the Central Bank of Nigeria entered into a currency swap agreement which was signed on April 27, 2018 for the exchange of sum of 15 billion Renminbi for N720 billion over an initial duration of three years which is liable to extension based on mutual agreement. This agreement had been on the drawing board over a period of almost three years and the intention is to remove the difficulties occasioned by dealing in third party currency as both countries consummate trade transaction. For emphasis this deal is restricted only for trade flows with the sure purpose of contributing to the stability of financial markets of both countries as well giving a boost to the volume of trade flows between the two countries which as at the end of December 2017 stood at 2.7 billion dollars. Businesses intent of taking advantage of this window of opportunity are expected to approach designated authorized dealers which are Deposit Money Bank and Merchant banks to open an account having obtained a pro forma invoice for the opening of Form M while the designated banks in Nigeria are expected to have engaged the services of Correspondent Banks in China and where possible in Nigeria but for emphasis payment can only be made to beneficiaries in China and not elsewhere. The advantage of this window is that there is now no longer need for importers to source dollars before transactions are concluded. The Central Bank of Nigeria served notice that it would conduct bi-weekly auctions for the transactions to determine the rate of exchange at which the orders would be concluded. But banks are on notice that transactions must be concluded within 72 hours following the successful auctions otherwise the purchase must be returned to Central Bank to be bought at CBN advertised buy back rate. It has been emphasized by the Central Bank that Domiciliary Accounts would not be opened in Renminbi. Most business people are familiar with the modalities for these transactions as they are the same as doing any import business from any other country.
“It is expected that the Central Bank would up the ante regarding sensitization of the business community regarding the inherent advantages of this currency swap deal while encouraging all to optimize its potentials.”
The only difference is that this time the additional headache of looking for dollars to consummate the transaction is removed as Naira accounts will be debited. It is expected that the Central Bank would up the ante regarding sensitization of the business community regarding the inherent advantages of this swap deal while encouraging all to optimize its potentials. We look forward eagerly to the full realization of the promise of this deal.
A few weeks ago, the Minister of Finance mulled the idea of basing the assessment and retention of office by CEOs of revenue agencies on performance based on what, she claimed, under-utilisation of their revenue generation potential. What is your comment on this?
This is most certainly novel idea to the public sector. What the Honourable Minister is trying to do is to import private sector template to whip those in positions of authority to be accountable and earn their keep. This approach could be efficacious if she is able to nail it down to catalyze activities in the public sector as it is bound to do magic if targets are set and managers are asked to achieve such targets. This is a variant of Management by Objectives. To ensure that those affected are properly motivated, the setting of the targets should be mutually agreed. With a balance sought between those charged with achieving the targets who would want easy targets which could be achieved without much effort and the drivers of the scheme who would want to set targets that would stretch.
“This approach could be efficacious if she is able to nail it down to catalyze activities in the public sector as it is bound to do magic if targets are set and managers are asked to achieve such targets.”
Once the targets are agreed there should be monitoring time lines say quarterly with milestones similarly determined so progress is gauged as milestones are reached with the possibility of timely adjustments as the need arises. Also every attempt must be made to isolate reasons for non-achievement of the targets and retention of office based on non-attainment of targets could be extreme position to take. What is practicable is after a number of agreed non-attainment of the targets that bonus or increment of the incumbent could be undermined. Really the question of retention of positions based on targets should not be part of the template. This procedure could work wonders as it could give needed fillip to performance provided that all concerned play their expected roles so that nobody is handicapped by circumstances and conditions of operations beyond their control.
The latest PEBEC report indicated that MDAs, including the Ministry of Finance, Nigeria Customs and others continue to exhibit opacity in their finance processes. How do you react to this and how can this problem be finally tackled in the nation’s public finance system?
Lack of transparence in operations must not be condoned for a regime that anchors its bona fides on probity, accountability and transparence with zero tolerance for corruption. It is, for instance, surprising that such critical indices such as the quantity of petrol consumed daily in the country is still in the realm of conjecture despite the capabilities which technology provides in undertaking present day operations. My take is that once there is the political will some of these issues are not as difficult as they are meant to be. What I would recommend is to engage the services of renowned accountancy firms to track processes and procedures to install reporting templates to make such issues a thing of the past. It must be observed, however, that it is one thing to put procedures in place but another thing to ensure that they are not observed in the breach. There is no reason why issues relating to the volume of PMS consumed in the country should remain in the realm of conjecture.
The polity is becoming increasingly overheated as the Legislative-Executive face-off assumes a more worrisome dimension now. What does this portend for budget performance and sustainable growth of the economy in the short and medium term?
The Executive/Legislative face off is unfortunate and rather worrisome. It remains a fact that the current Administration had scored poorly in managing this relationship to the chagrin of the hapless citizenry. What cannot be controverted is the fact that this worrisome situation has undermined the performance of the economy and adumbrates the fact often stated that politics trumps the economy; seek you first the kingdom of orderly and peaceful political relationship and the performance of the economy is guaranteed and becomes seamless. This lack of harmonious relationship between the Executive and the Legislature is glaringly noticeable in the record we have achieved with the preparation, approval and implementation of the Budget. In the past three years we have not been able to have the budget approved before June of any year. And mindful of the impact of the Budget for the growth and development of the economy, it is little wonder that for instance all the efforts to exit the recession is lagging behind to the discomfiture of all concerned with compatriots complaining vociferously that they are yet to feel the impact of the exit from recession. We have this sort of experience with the preparation of the Budget and yet we unrealistically expect to achieve record implementation! That would tantamount to making omelets without breaking eggs. We are already at the end of the second quarter of the year 2018 and the state of play with the Budget is at best work in progress. In fact it is fair to say that issues relating to the Budget have been consigned to the background in the light of 2019 elections and all the associated posturing and shenanigans that have so far been witnessed. The Budget is the blue print for running the economy in the year in prospect and as we experience such frustrating delays the growth of the economy is negatively impacted as particularly capital budgets cannot be implemented without the budget approved. And for shouting out loud it is the Capital spend that would catalyze the needed activities in the economy to guarantee quick exit from recession, the creation of employment opportunities, facilitate needed growth and development of the economy. There are a number of issues here which must be addressed if we would ever attain the commensurate level of seriousness required to make the Budget play its role in fast forwarding the rapid growth and development of the national economy. In the first place there is the need for a complete shift in paradigm. We must re-orientate our mindsets to understand and appreciate the importance and place of the Budget; its preparation, approval and faithful implementation. The Fiscal Responsibility Act is quite explicit regarding when the Budget must be presented by the Executive for the consideration and appropriation by the Legislature; not later than the end of the second quarter in the fiscal calendar.
“We must re-orientate our mindsets to understand and appreciate the importance and place of the Budget; its preparation, approval and faithful implementation.”
We are also on record to have proposed the establishment of an effective Budget Office at the National Assembly to collaborate with the Budget Office of the Federation during budget preparations to make the current rancor and delay associated with this process unnecessary and the Executive must return to the beneficial practice of making at least half yearly public presentation of the state of implementation of the Budget during the Fiscal year. We hope that some semblance of sanity would return in this respect in the not too distant future to enable us confront the challenge of lack of commensurate growth of the economy against the background of burgeoning demographics which portend a keg of sitting gun powder.
The AfCTA pact which Nigeria is yet to endorse is an issue that has raised so much concern as regards the implications of the continental trade pact for Nigeria’s economy. Do you think the President should sign the agreement? If yes, why? If No, what are your fears about the pact?
Considering the position of Nigeria in the African continent it was in bad faith to renege on signing the Agreement even as the President participated at the meeting that was summoned for that purpose. We understand that Nigeria was in the forefront of the nations that championed the implementation of this pact as should be expected only for us to refuse to sign, giving the reason of lack of adequate buy in by critical stakeholders. All that should have been considered and concluded during the preparation stage. In the short term we might be myopic to claim that Nigeria might be hard done by if it signs as it could stand to lose a lot given the strength of its economy. But Nigeria has a responsibility to pull up the other less endowed countries in the continent thereby underwriting the collective development of all.
“I suppose we must have signed the AfCTA by now; but if we have not we must then be seen to live up to our manifest destiny by signing the pact in the shortest possible time without much delay if we must continue to lead from the front.”
What is more is the fact that there are many such pacts in different parts of the world and therefore the continent for which each country goes alone might be disadvantage as it might not be in the best position to drive good bargains. We are here reminded of the recent advertised and celebrated BreExit from which Britain is struggling to break away from European Union. What such agreements do is that they encourage the adoption and promotion of comparative advantage to facilitate the development of member countries of the Union. But the known downsides have to do with the loss of autonomy to take certain decisions unfettered. What Nigeria needs to do is to ensure that well informed protocols and guidelines are enshrined to guarantee that it does not cut its nose to spite its face. We need to protect local production capacity and jobs otherwise we might let down our guards and then be confronted with the challenges of having to play catch up as we attempt to protect local capacities and particularly employment opportunities. Otherwise Nigeria must and should live up to its big brother status as it answers to its manifest responsibility of spreading prosperity across the countries of Africa, particularly within the ECOWAS sub-region. I suppose we must have signed the AfCTA by now; but if we have not we must then be seen to live up to our manifest destiny by signing the pact in the shortest possible time without much delay if we must continue to lead from the front.