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CBN Gov, Atedo Peterside Clash Over Forex Policy

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Godwin Emefiele CBN - Investors King
  • CBN Gov, Atedo Peterside Clash Over Forex Policy

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele; and the Chairman, Stanbic IBTC Bank Plc, Mr. Atedo Peterside, on Thursday disagreed over whether the flexible foreign exchange policy of the apex bank had been able to address the foreign exchange challenges in the country or not.

They both spoke in Abuja at the 14th Daily Trust Dialogue, which had as its theme: ‘Beyond recession: Towards a resilient economy’.

While Peterside claimed that the forex and interest rate policies of the apex bank had not achieved the needed impact owing to the fact that they were not market-determined, Emefiele said that the policies were not made in isolation.

The Stanbic IBTC chairman said that currently, there were 11 major steps that the government needed to take so as to address the current economic woes.

They steps, according to him, include correcting the imbalance in the foreign exchange policy, making peace with the Niger Delta militants, sale of some national assets, deregulation of the entire downstream petroleum sector, reduction of the bloated civil service, and making states economically viable.

Others are addressing deficit in infrastructure, improving the nation’s legal system, respect for rule of law by the government, restoring business confidence and appointment of directors to the boards of every regulatory agency of government.

He said, “I know that there are those who will criticise me for saying that the Federal Government’s economic policy direction remains unclear. My response to them is that the most significant economic reforms embraced so far by government came about rather reluctantly.

“The Central Bank of Nigeria should accept that its foreign exchange and demand management policies have failed. The more restrictions they have placed on forex repatriation, the less likely it has become that badly needed forex inflows from portfolio investors, foreign direct investors and Nigerians will pick up.”

He added, “The CBN has inadvertently created a siege mentality, thereby making privileged access to its forex allocations, which are reserved largely for the politically well-connected, the best investment game in town.

“Furthermore, the directive to banks to allocate 60 per cent of forex to manufacturers that account for only 10 per cent of the Gross Domestic Product has exacerbated an already bad supply situation.

“Forty per cent is too small to accommodate the rest of the economy and so all other sectors have been crippled, including the service sector, which accounts for over 50 per cent of the GDP.

“This has unleashed panic, thereby sending the parallel market to the high heavens. Forex inflows disappeared partly because of the uncertainty surrounding the ability to repatriate interest/dividends through an overly restrictive 40 per cent window.

“There is nothing magical about 60 per cent or 40 per cent. It has no scientific basis. Meanwhile, it has huge adverse distortionary implications on the supply side. The end result has been our mind-boggling and widely divergent multiple exchange rates, which have spooked investors who have taken fright and also taken flight.

“Sadly, we have effectively ‘shot ourselves in the foot’ by taking unsustainable actions that crippled both forex inflows and the service sector, whilst favouring even those manufacturers who own ‘zombie’ industries that are horribly import-dependent.”

Peterside restated his earlier position on the sale of some national assets, adding that they could generate between $15bn and $20bn in the next two years if their sale was planned carefully.

He said those advising the government to rely on debt alone to take the country out of the present low foreign exchange trap did not mean well for the nation, adding that such a move was a high risk strategy that should be rejected.

Peterside said, “Our economy is underperforming because, among other things, it is caught up in a low foreign exchange trap. Borrowing alone is not and can never be a panacea.

“Indeed, borrowing without instituting necessary and badly needed economic and structural reforms is akin to suicide. Those who are canvassing for more foreign debt simply because our debt to GDP ratio is low are overlooking the fact that our debt service ratios are already high.

“Our debt service ratios are high because our tax to GDP ratio at six per cent is exceedingly poor. Relying on debt alone to get us out of the present low foreign exchange trap is, therefore, a high risk strategy. I consider it to be ill-advised.”

Responding to the issues raised by Peterside, the CBN governor said the priority of the apex bank now was on Nigerians who wanted to import raw materials for the purpose of manufacturing.

Emefiele said, “Our priority today will be Nigerian masses, Nigerians and no other person. Within the limited resources at our disposal, we will continue to give emphasis to those who want to import raw materials.

“We will give emphasis to those who want to employ plants and equipment that will help this country. We will direct support and emphasis to those who are going into agriculture, who are importing agricultural raw materials and implements because we love our country.

“Mr. Atedo Peterside has raised 11 points, which I will say some are contestable and we disagree with some of them. But we will look at them, especially those that affect the central bank.”

The apex bank boss added, “But it is very important that when you stand and talk, it is always good for you to come from a standpoint where you ask those who have made the policies why they have made the policies.

“Policies are not made in isolation. They are made because certain things have happened and they are made because there is an objective in mind, and they are made to ensure that those objectives are achieved.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Personal Finance

Don’t Let Lifestyle Inflation Jeopardize Your Financial Future – FBNQuest

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Investors King

A phenomenon that is often less obvious to most people is lifestyle inflation, otherwise known as “lifestyle creep”. It occurs when a rise in discretionary income, the amount available to an individual after making essential expenses, prompts an increase in living standards as luxuries become new necessities.

Financial literacy is an important aspect of learning what strongly impacts your quality of life. It affects your ability to navigate through economic downturns and your response to unexpected financial windfalls. Changes in financial fortunes happen to us in varying measures, influencing how we save, spend and invest. Without a plan, it becomes more difficult to resist increased spending: the urge to upgrade your cable subscription, enjoy fine dining, add more items to your cart, and add a few more luxuries to your travel experience. The list of possibilities is endless when you have more money to spend on optional items.  It all adds up quickly and when you adapt to your new lifestyle, it becomes more challenging to give up former luxuries that now feel like necessities.

It’s not all bad though. A measure of lifestyle inflation is unavoidable and not entirely unacceptable. It is okay to reward yourself, however, you must avoid situations where subtle increases in your expenses become obstacles on your path to achieving your financial goals.

The younger population, in particular, should pay more attention to lifestyle inflation given its potential long-term impact on investment goals. Research in the United States indicates that most inflation-adjusted wage growth occurs in the early working years of the population. It is likely that a similar pattern occurs in Nigeria. This implies that failure to keep lifestyle inflation under control in your early working life may cost you the opportunity to make investments that will be more valuable later in your career.

Lifestyle inflation can be best managed by creating a system that makes it easy to save and invest your money. Here are two simple recommendations that could help you build habits to limit the impact on your financial goals.

  1. Create a reverse budget that treats your goals as bills:  This is a simple spending plan where your primary focus is on saving and investing first, before taking care of any other expense.
  2. Automate your finances, especially your savings and investments: Few people find a way to increase their savings over time, however, modern technology has provided platforms that make it easy to escalate savings and investments routinely. The great thing about automating your finances is that it offers an opportunity to seamlessly create a new habit. Research shows that you are more likely to succeed at things that become habits than at things that require change because we are wired as humans to resist change.

FBNQuest Asset Management offers you the opportunity to automate investments in one of a series of products that best fit your financial goal. If you are a conservative investor, you may consider making regular investments in the FBNQuest Money Market Fund. If you are more risk-tolerant, you may decide to seek higher returns by investing in the FBNQuest Equity Fund. Automatic debits could be made monthly from your bank account.

Creating a system for financial success is all about making intentional choices with our money. A good system will direct your money to the things that matter most and keep you on track to handling lifestyle inflation.

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Finance

FG to Earn N462 Billion from Electronic Money Transfer Levy in 2021 – World Bank

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Money Transfer - Investors King

The World Bank has said the Federal Government of Nigeria will earn an estimated N462 billion from electronic money transfer levy in 2021.

The leading multilateral financial institution disclosed in its ‘Resilience through Reforms’ report.

The Federal Government had introduced a levy on electronic money transfer in the Finance Act 2020 to take advantage of the growing electronic transfer in the country and up revenue generation.

The electronic money transfer levy is a single one-off charge of N50 on electronic fund transfer in any deposit money bank or financial institution on any type of account on sums of N10,000 or more.

Akpan Ekpo, the Chairman of the Foundation for Economic Research and Training, who spoke in a telephone interview voiced his concerns on the levy.

He said, “The levy is remitted to the government, which is fine. But I think the savers, the people who use the transfer channels, are over-levied. You pay maintenance fee, transfer fee, and I think if this level of levying continues, it will discourage people from using electronic channels.

“Personally, I think the EMT levy should be out of the Finance Act. There is too much burden on the citizens, although the government is making great money from it. Let us hope they use the money wisely, but it shouldn’t have been put there in the first place.

“It is a law now; there is nothing that can be done about it. But I hope it is used wisely, and they would be transparent about how the money is being used.”

Akpan said the EMT levy would discourage individuals outside the formal banking net.

He said, “With the EMT levy, more people are discouraged from using the banks and its services. A lot of Nigerians sell in rural areas, and are outside the financial system net.

“With the EMT, more people are further excluded. There really was no need to introduce the EMT; it will discourage those who are not already in the formal banking sector from even coming into it. It is likely to further deepen the financial exclusion of many Nigerians.”

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Banking Sector

Hope PSBANK Collaborates With FG To Create 100 Jobs In Each Local Government

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Hope PSBank- Investors King

Hope Payment Service Bank, a subsidiary of Unified Payment Services Limited and Nigeria’s premier digital bank is collaborating with the Federal Government through the Ministry of Labour and Productivity to create jobs for no fewer than 77,400 people across the country.

The employment opportunity is part of the exit strategy of the Federal Government’s Special Public Works Programme being executed alongside the bank by empowering 100 Nigerians in each of the 774 local governments.

Speaking at the official kick-off of the collaboration, the Managing Director, Hope Payment Service Bank, Mr. Ayotunde Kuponiyi noted that the digital bank serves as an enabling platform that would interface with 77,400 beneficiaries selected from the Special Works Programme of the FG to exit them into self-employment.

Kuponiyi stressed that the focus of the collaboration is geared towards empowering beneficiaries through the agency banking platform in carrying out financial services such as account opening, bills payments, fund transfer, cash in/cash for Nigerians while they earn commission in return with just the use of their smartphones.

According to him, this initiative comes at no cost to the beneficiaries as they can use their phones to carry out agency banking activities for which they earn commissions on each activity carried out. “Once on board, these beneficiaries will become HOPE PSBANK agents. They will undergo training on the various activities by the bank at no cost to them”, he added.

“We are very excited about this collaboration with the Ministry, which is in line with the thrust of the social objectives of Hope Payment Service Bank – poverty reduction through financial inclusion and diffusion of digital financial services”, he said.

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