Participants at a seminar, organised by one of Nigeria’s leading financial institutions, Access Bank Plc, want the government bail out a c tion as was done in advanced economies to mitigate the effects of the current me l tdown in the country.
“The meltdown has led to severe liquidity crunch derived from the offshore repat riation of funds by foreign investors, continuous depreciation of the naira, fal l ing crude oil price and stocks. Globally, governments are intervening, but here,
the case is different,” one of the participants at the seminar, Ebenezer Olufowo s e, an Executive Director of Access Bank, said.
The impact of the global crisis on the African economy, particularly in Nigeria, has been profound and multi-dimensional, leaving most of the countries more str u cturally imbalance.
The Nigerian Stock Exchange (NSE) lost trillions of naira with market capitaliza tion, the All Share-Index dropping by more than 30% and share prices of many sto c ks depreciating far below their initial public offer.
“Our expectations is that the Central Bank of Nigeria (CBN) and government shoul d intervene like in other places. More direct involvement by the federal governm e nt will help. They need to play a central role through policy initiatives. Clear l y we need an alternative source of funds since we do not have a robust bond mark e t which should have been a good option,” Olufowose noted.
The Nigerian government on its part has maintained that the market forces should be allowed to take its course instead of direct intervention that will require f inancial bail out.
However, many financial experts think otherwise.
“The government has responded belatedly but correctly in its direction, but inad equate in its dosage. What is required and might happen will be cocktail of mone t ary policy measures to stabilize the banking system. This will be complemented w i th fiscal stimuli to catalyze activity,” said the Chief Executive Officer of the
Lagos-based Financial Derivatives Company, Bismark Rewane.
Rewane said during financial crisis arising from excess demand, supply-side shoc ks, the conundrum, a huge budget and dramatic changes in the value of a currency
as was the case now, government must intervene.
The participants who spoke extensively on Macro-development in the Nigerian Fina ncial Markets, impact of the last nine months on the next 12 months, noted that o ver-reliance on the banks for short, medium and long term funds by corporate org a nisations in the absence of a vibrant bond market which is currently dominated b y governments, will lead to volatility.
“The challenge Nigeria faces is to coordinate the response to the global crisis. Right now, there is no coordination on the policy with the interest and exchang e rate. We don’t know who controls the interest rate between the CBN and the Debt
Management Office (DMO); there is need for harmonisation in the implementation o f policy,” the CEO of Economist Associates, Ayo Teriba, remarked.
The Chief Executive Officer of Africa Finance Corporation (AFC), Andrew Alli, in his contributions, emphasised the need for confidence building and openness fro m African governments in dealing with the current meltdown.
“Building of confidence as regards the exchange rate and other policy is very im portant. There has to be transparency and openness, let the people know what is h appening.The problem gets compounded when people don’t know what is happening, w h ich often leads to panic and speculation, which are injurious to the economy,” A l li added.