Bank chief on why FG may not succeed with diversification agenda

The President /Chairman, Chartered institute of Banker of Nigeria (CIBN) Professor Segun Ajibola has warned the Federal Government of Nigeria to tackle the international barriers to Nigeria domestic good in order to succeed with the country’s goal of diversification.

The CIBN chief , who made this statement over the weekend at the International chamber of commerce (ICC) dinner night in Lagos noted that some countries sometimes, develop restrictive administrative rules, such as high level of food and environmental standards in order to discourage imports.”, he said.

He, therefore, urged the FG to intensify effort in order to give Nigeria domestic good a boost and acceptability within Africa and outside world.

In this vein, he advised the government to deliberately devalue its currency against other currencies in order to make export of its goods and services cheaper to the outside world while making imports into the economy more expensive.

Ajibola, however, said that the policy is usually employed to boost exports of goods and services. He said an example of this is China’s ever-growing export sector.

According to him, ‘Between 1995 and 2005, China’s policy was to maintain the exchange rate of the Yuan against the Dollar at $1 for 8.28 yuan. The constant devaluation of the Chinese yuan during this period largely contributed to the growth thrust of China’s export market, and helped to achieve a current account surplus of $162 billion

He also advised the government on the issues of foreign dumping. He stressed that the caution of the government will prevent the “dumping” of foreign, often cheap and of low quality, goods into an economy causing local firms to close down.

Ajibola therefore mentioned that government subsidies are also used to enable local firms compete favourably with their foreign counterparts. These are often in forms of cheap loans or lump-sum payments to bulging firms within a local economy.

He said for speedy economic growth, government preferential treatment could come in, which he said is usually in form of legislation or initiatives either to encourage or make necessary the purchase of locally produced goods and services.

According to him, in the United States, the Buy America Act established in 1933 was put in place to protect domestic labour by providing a required preference for American goods in direct government purchases.” The exception to this rule is if total government purchases of locally made products constitute over 25% of total procurement or if the products are not produced locally” he noted.

Ajibola, however, said that although the Nigerian government has made great efforts not only to save scarce foreign reserves but protect the local industry from cheap imports through both tariff and non-tariff barriers, the menace and widespread prevalence of smuggling across country borders has also reduced the positive impact of such efforts. He said still, there is need for government at all levels to show strong commitment to the diversification of the Nigerian economy from oil.

He said this would involve establishing a task force that would review other countries’ examples who had been in a similar situation like ours and leapfrog by learning from their experiences.

He mentioned that the government should support the Small and Medium Sized Enterprises (SMEs) by providing the enabling environment for business growth and production of goods and services that would compete favourably in the global market.