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Financial Markets Remain Shallow- IMF

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Nigeria’s money and capital markets still lack the depth of lifting  the economy out of the doldrums, the International Monetary Fund (IMF) has said.

Also in the league of markets with shallow profit, according to IMF are most of the other sub-Saharan African countries, despite reports of reforms in the respective economies.

IMF, in a recently released report, noted that the domestic money and capital markets in Nigeria and most sub-Saharan African countries remain underdeveloped and shallow offering mostly short term instruments.

According, stock market capitalisation remains low, while private securities markets are largely underdeveloped.

The IMF stated that the shallowness and lack of versality of hedging instruments in African financial markets likely accentuated short-term exchange rate movements.

Therefore, foreign exchange markets offers a limited array of forward hedging instruments, reflecting a part the concentration of foreign exchange receipts in the hands of the public sector, through aid or commodity exports.

Nabil Ben Ltaifa, Stella Kaendera and Shiv Dixit of the African Development IMF, in their submission, “Impact of the Global Financial Crisis on Exchange Rates and Policies in Sub-Saharan Africa” observed that the currencies of many sub-Saharan African countries, like those of many emerging and developing economies, offered large depreciation with onset of the global financial crisis.

Nigeria’s currency, as one of the countries under study, was said to depreciate by at least 20 per cent between June and March 2009.

After April 1, 2009, while some currencies reversed their depreciating trend with respect to the United States dollar, the Nigerian Naira continued almost unchanged.

Although, while in most countries above-trend inflation mitigated the real effect of nominal depreciation, Nigeria registered a significant (over five per cent) real depreciation in its currency over the whole period.

The trio observed that exchange rate volatility increased significantly compared to the pre-crisis period.

Volatility was generally higher with respect to the United States dollar but broadly less vis-à-vis the euro. The naira experienced significant increases in the volatility with respect to the three major currencies.

In contrast, the Rwandan and Tanzanian currencies displayed similar or lesser volatility before the crisis with respect to the U.S. dollar.

Talking about the factors that affected the value of exchange rates, the experts noted that the first factors were external, reflecting the transmission of the global crisis through the trade and financial channels as well as the volatility of the U.S, the main international reserve currency.

“The impact was commensurate with the extent and nature of each country’s exposure to trade and global financial markets. At the same time, domestic policies played a role in shaping the nature and magnitude of the impact,” they said.

Concerning the external environment, the IMF officials observed that trade had, as expected, an adverse impact on the region’s currencies, but that the magnitude of this impact seems to have varied significantly across countries.

According to them terms-of-trade movements were likely the main factor underlying movements in the exchange rates of Nigeria and Zambia, the two large commodity exporters in the sample.

Conversely, the rebound in copper and oil prices in the later part of the period supported the recovery of the Zambian Kwacha and a stabilisation of the naira.

The IMF officials also attributed policy choices of countries to the depreciation of their currencies.

Nigeria operated a managed floating system, which tended to depreciate more, the economy consequently, registered large depreciation, reflecting the limit of currency management in the face of large charges in the external environment.

It was observed that the domestic policy mix adopted in response to the external crisis also played a role in explaining exchange rate dynamics.

According to them, most countries in the sample intervened in their foreign exchange markets in an effort to stem the shock to their currencies.

\however, they said, managed floating regime like Nigeria intervened in a more regular and extensive manner to halt the depreciation.

“As a result, nominal exchange rates in these countries have tended to be more stable. But intervention by the Nigeria’s Central Bank was however, unsuccessful in preventing a large step depreciation of the currency by the end of 2008, in the large turnaround in trade and capital flows.

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Debt Servicing Hindering Nigeria’s Dev – IMF

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The International Monetary Fund (IMF) has opened up on Nigeria’s socio/economic development issues, saying that the country allocates the majority of its revenue to debt servicing, leaving limited funds for critical development projects.
Disclosing this while speaking during the Fiscal Monitor press briefing at the IMF/World Bank Annual Meetings in Washington DC, David Furceri, Division Chief of the IMF’s Fiscal Affairs Department, emphasised the need for Nigeria to adopt more effective revenue mobilisation strategies to ease this financial burden.
Furceri noted that Nigeria’s debt service-to-revenue ratio stands at around 60 per cent, significantly constraining the government’s ability to invest in social and economic programmes.
Although the debt service-to-GDP ratio has declined from nearly 100 per cent to 60 per cent, he stressed that the country must further reduce the share of its revenue allocated to debt repayments by focusing on broadening its tax base.
He said, “There is a need to grow the revenue-to-GDP ratio.  For a country Like Nigeria, the Debt Service-to-Revenue is about 60 per cent.  What that means is that a larger part of the revenue of the country goes into debt servicing.
“What we recommend for countries like Nigeria, if they can improve their revenue mobilisation, they will be able to reduce the portion of the revenue that goes into debt servicing.
“It is important to broaden the tax base in order to have more revenue and especially in Nigeria to put in place a system and mechanism that is transparent and efficient to assist the government in collecting more revenue”.
He called for the implementation of a transparent and efficient tax collection system, urging the government to improve its fiscal operations to generate more income.
Also, the IMF’s Fiscal Monitor Report released last Thursday highlighted projections that Nigeria’s debt-to-GDP ratio, currently at 50.7 per cent, is expected to drop to 49.6 per cent by 2025.
It noted that the country’s public debt includes overdrafts from the Central Bank of Nigeria and liabilities from the Asset Management Corporation of Nigeria.
“The overdrafts and government deposits at the Central Bank of Nigeria almost cancel each other out, and the Asset Management Corporation of Nigeria debt is roughly halved”, the report noted.

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SON To Simplify SMEs Certification Process

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The Standards Organisation of Nigeria (SON) has revealed plans to support Small and Medium Enterprises (SMEs) across the country by simplifying access to certification and standards, in line with global best practices.
According to the agency, its initiative at the forefront of this drive is the Mandatory Conformity Assessment Programme, designed to assist local manufacturers in maintaining quality and safety standards, a key requirement for gaining consumer trust and penetrating international markets.
Acting Regional Director for SON in Lagos, Theresa Ojomo, disclosed this during the annual Walk for Standards event held in Lagos to mark World Standards Day.
She stated SON’s role in facilitating the growth of small businesses through programmes tailored to their needs.
“We have brought it down to the very small micro-organisations, encouraging them that they can imbibe standards”, she said.
She noted that businesses operating with minimal infrastructure could ensure quality in their production processes with SON’s support.
Ojomo explained that SON had made the process of adhering to standards more affordable and less burdensome for SMEs.
“We have brought in schemes that are very low in the economy because they always complained that it’s costly to have standards and quality.
“SON conducts only one inspection per year for micro-enterprises to ease the compliance process. The government and SON are ensuring that as small as the unit is, you can imbibe standards”, she remarked.
The Head of Codex, Nutrition and Tobacco Monitoring at SON, Yunusa Mohammed, reiterated that the organisation was committed to ensuring that consumers get value for their money by enforcing quality and safety standards.
“The ultimate aim for developing standards is to ensure quality and safety. Without testing the product to the requirements of the product standard, there is no way you can give that assurance”, he said.
Mohammed noted that SON had invested in state-of-the-art laboratories across the country to further support SMEs by offering testing services that help small businesses certify their products for both local and international markets.

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Group Partners Police Against Piracy In Nigeria’s Waterways 

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Active Marine Surveillance Coast Guard limited, a private security agency, has stated its preparedness to assist the police and other security agencies to check piracy along the nation’s waterways.
Director General of the Security outfit, Commander Godwin Amare, said this during the passing out parade of over 150 members of  the Coast Guard in Port Harcourt.
He said apart from checking piracy, Active Marine Surveillance Coast Guard limited also provides security at jetties across the state and check pollution along the waterways, as well as mount security surveillance across the country.
Amare, however, said his security outfit needs the support of the state and federal governments in the discharge of its functions..
He said with government support, the problem of insecurity will be reduced in the states.
Amare also stressed the need for the government to engage  the outfit in the provision of security in the state, adding that by doing so, government will also be creating employment opportunities for the people.
According to him, it’s men can also be engaged in the provision of security at strategic locations across the state.
He used the occasion to commend the Deputy Director General of the outfit, Captain Dain Elekima Joyfull, as well as  Captain Emberra Michael Niyikpen, and Pastor Anthony Afakwa, for their support.
Speaking, the Rivers State Commissioner of Police, Cp Mustafa Bala, who was represented at the occasion by SP Luka, urged the newly passed out officers of the Civilian joint taskforce and Active Marine Coast Guard limited to be professional in the conduct of their duties.
He also pledged to provide them with the necessary support.
Also speaking, the Rivers State Commandant of the Civilian Joint Taskforce, Commander Richard Akpobari, said his group is prepared to support the security agencies to curb criminalities in the state.
According to him, the situation aims to reduce the burden of providing security in the state.

By: John Bibor

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