Institutional imperative for national transformation [Sun, The (Nigeria)]
(Sun, The (Nigeria) Via Acquire Media NewsEdge) By Roberts Orya
In July 2013, Nigerian Export – Import Bank invited competitive bids for the renovation of Nexim House, through a notice that was placed in national newspapers. When the renovation is completed, the four-storey Nexim House will acquaint non customers of the bank with the institutional transformation that began in September 2009, when the current management assumed office. Customers and other stakeholders are already aware that a programme of renewal of Nexim Bank has been on-going for more than four years.
During this period, the bank has fundamentally realigned with its core mandates, grown its balance sheet, strengthened corporate governance and risk management frameworks, and has begun to deliver shareholders value as well as help to generate revenue to the government.
The Transformation Agenda of President Goodluck Jonathan is a call for institutional renewal and excellent performance in order for national transformation to take place in our country. There are multiple fronts for ventilating the Agenda. Not least in importance are the agencies of government that are active market participants. While inaugurating the new Board of Nexim Bank late last month, the Honourable Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, described the role of the bank as "critical to the growth of the economy." She added: "If Nigeria is going to play its role of being the power house within the West African sub-region and Africa, we look forward to the board in performing its role as it should be."
Either because they lacked legitimacy or they inevitably glossed over performances of state's market institutions when they took on unconstitutional, political roles, the military dictatorships left a deplorable legacy for the MDAs. For instance, the total amount of external debt Nigeria had was largely unknown by the time the country returned to democracy in 1999. Yet the country was spending more than 25 per cent of the yearly budget on debt servicing. But today, with the establishment of the Debt Management Office, it is possible to know the real-time book value of Nigeria's domestic and external debt, and their maturities. Little wonder then, that Nigeria now has a very active sovereign bond issuance programme that attracts local and international portfolio investors. As a result of the reform of the institutional framework for governing the country's sovereign debt, an important piece of work Dr. Okonjo-Iweala advised before serving the Administration of former President Olusegun Obasanjo as Finance Minister between 2004 and 2006, Nigeria's plan to issue $1 billion Eurobonds in July easily attracted over $4 billion bids, with yields comparable to emerging market rates of 5.375 percent yield for the $500 million 5-year bond and 6.625 per cent for the $500 million 10-year bond, according to data provided by Thomson Reuters news and analysis service.
The outcomes of the reforms the Central Bank of Nigeria has undertaken in the banking industry within the last ten years are indicative of the catalytic role institutions of state can play in engineering market confidence and performance. The Professor Chukwuma Soludo-led reforms saw dramatic growth in bank capital, launching Nigerian banks on the African scene in a big way that was previously not conceived of. The current CBN Governor, Mallam Sanusi Lamido Sanusi, has ensured that Nigerian banks are not just big; but they also have to be healthy, transparent and well-governed. There is absolutely no doubt that the reform efforts have aligned Nigerian banks with the reputation of the country as a regional giant, and Africa's leading market.
Similarly, the reform of the licensing of the GSM operators in the early 2000's, has provided another validation of Nigeria as the leading market in Africa, with over 100 million mobile phone subscribers.
It is the business of government to ensure that development is brought to the people in a sustainable manner through the instrumentality of market. Those who belong to the school of thought which categorically declares that "government has no business being in business" now have to rethink this principle that is evidently amenable to circumstances.
One important lesson of the last global financial market crisis is that government must respond to the need to save market from collapse when the occasion demands it. That government mediates business indirectly through legislations and regulations does not preclude it from intervening to save the market. Quite the contrary, the economics of crisis can be very intricate and costly such that only government has the resources to invest in it in order to reverse a downward spiralling, stabilize the market and stimulate economic growth. In the United States, government had to save the big automobile companies in order to preserve capacity for economic growth and job creation, apart from the quantitative easing programme of the Federal Reserve. In the same vein, the government of late President Umaru Yar'Adua and the incumbent Administration of President Goodluck Jonathan had to take a policy stance that guarantees the banking sector and preserves depositors' funds from any kind of loss, including through spiraling inflation and crash in the value of the naira.
Even at normal times, the involvement of government in business can be direct through its agencies that provide public utilities, productive goods, research and development, infrastructure and export financing – as is the case with Nexim Bank. Performances of these agencies often provide the hard evidence that government is working or otherwise. It is not surprising therefore that the current Administration has put a lot of emphasis on performances of state agencies that represent it in the marketplace, with the supervising minister regularly providing scorecards at the FEC meetings.
Nexim Bank is uniquely positioned to deliver the non-oil external trade objectives of the Federal Government of Nigeria. Although scholarship of Nigeria's diplomacy may aver that we have not always woven economic benefits into international relations, it is a path we cannot continue to tread.
The operation of the Export – Import Bank of China provides a good model of how a developing country can weave economic objectives into its diplomatic relations with its smaller peers. Integrating China's win–win philosophy, China's Exim now prides itself in leveraging foreign policy to grow its export finance and international lending portfolio. By the end of 2012, China's Exim had established correspondent banking relations with 1,280 banks in 159 countries and regions. Same year, its on-balance sheet and off-balance sheet assets reached RMB 1,704.337 billion (USD 278 billion) and loan balance reached RMB 1,342.908 billion (USD 219 billion).
As a key institution of state, the value of the assets held by China's Exim fairly reflects the size of the country's GDP. The People's Republic of China leverages its outreach and economic agenda on the strength of its international credit-granting institutions. In a lot of situations, China's international loans (often indiscriminately referred to as aid), provide soft-landing for the country as it negotiates the difficult terrains of Africa and South America where China needs access to mineral resources to fuel its growing economy.
According to Organisation for Economic Co-operation and Development (OECD) 2012 data, Nigeria accounts for 64 per cent of GDP (based on PPP valuation) of the 15 member-countries of the ECOWAS. With oil accounting for 85.6 per cent of Nigeria's export "products," according to the data, and the fact that Nigeria's crude oil is mainly supplied to the United States, we therefore have an indication that Nigeria is not doing much with regard to external trade within the West African sub-region. As a matter of fact, Nigeria's contribution to trade within Ecowas is about 10 per cent.
This data is not an indication that Nigeria needs to retarget its exports. It means there is ample opportunity for the country to leverage its GDP relative to the rest of the Ecowas bloc to increase its share of trade in West Africa. Therefore, the Sealink project (which Nexim Bank is facilitating to provide direct maritime links) will actually further the reach of Nigeria's trade to Central Africa, and through this improve our trade in Africa and beyond.
In the same way that China's Exim Bank provides soft landing for China's exports to Africa, Nexim Bank aims at playing a similar role in West Africa. Although the Nigerian economy is a small fraction of China's GDP, we aim to structure strategic deployment of Nigeria's economic strength towards improvement of the Nigerian trade objectives. By 2015, Nexim Bank will launch the framework for providing buyers credit facility for Nigerian export goods. This product is intended to address the psychology of the West African market in which the fear of domination by Nigeria has limited the trade potentials of the country. The mental barrier is easily removed, if like China, Nigeria provides financial incentive for its trade in West Africa.
The corporate transformation agenda that Nexim Bank started in 2009 has delivered the template on which rapid progress would be made in the growth of the nonoil sectors of manufacturing, agro-processing, solid mineral and services – the MASS Agenda of Nexim Bank. The results we have achieved in the projects we have provided development funding to, indicate how much more we can do as we push for Nexim Bank to become more integrated with the economic objectives of Nigeria's national transformation and international relations.
The inspiration for furtherance of the agenda of institutional transformation of Nexim Bank received additional boost with the appointment of Dr. Sarah Alade, Deputy Governor (Economic Policy), Central Bank of Nigeria, as Chairman of the newly constituted Board of the Nexim Bank. I believe we have entered a new phase that will provide more opportunities for Nigerian exporters to flourish.
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