ADVERTISEMENT
  • The Membership Club
  • PT Hausa
  • About Us
  • Advert Rates
  • Careers
  • Contact Us
Sunday, February 28, 2021
Premium Times Nigeria
  • Home
  • COVID-19
  • News
    • Headline Stories
    • Top News
    • More News
    • Foreign
  • Investigations
  • Business
    • News Reports
    • Financial Inclusion
    • Analysis and Data
    • Business Specials
    • Opinion
    • Oil/Gas Reports
      • FAAC Reports
      • Revenue
  • Opinion
  • Health
    • News Reports
    • Investigations
    • Data and Infographics
    • Health Specials
    • Features
    • Events
    • Primary Health Tracker
  • Agriculture
    • News Report
    • Research & Innovation
    • Data & Infographics
    • Special Reports/Features
    • Investigations
    • Interviews
    • Markets
  • Arts/Life
    • Arts/Books
    • Kannywood
    • Lifestyle
    • Music
    • Nollywood
    • Travel
  • Sports
    • Football
    • More Sports News
    • Sports Features
  • Projects
    • Parliament Watch
    • Panama Papers
    • Paradise Papers
    • AGAHRIN
  • Home
  • COVID-19
  • News
    • Headline Stories
    • Top News
    • More News
    • Foreign
  • Investigations
  • Business
    • News Reports
    • Financial Inclusion
    • Analysis and Data
    • Business Specials
    • Opinion
    • Oil/Gas Reports
      • FAAC Reports
      • Revenue
  • Opinion
  • Health
    • News Reports
    • Investigations
    • Data and Infographics
    • Health Specials
    • Features
    • Events
    • Primary Health Tracker
  • Agriculture
    • News Report
    • Research & Innovation
    • Data & Infographics
    • Special Reports/Features
    • Investigations
    • Interviews
    • Markets
  • Arts/Life
    • Arts/Books
    • Kannywood
    • Lifestyle
    • Music
    • Nollywood
    • Travel
  • Sports
    • Football
    • More Sports News
    • Sports Features
  • Projects
    • Parliament Watch
    • Panama Papers
    • Paradise Papers
    • AGAHRIN
Premium Times Nigeria
BUA Group Ad BUA Group Ad BUA Group Ad
ADVERTISEMENT
Ifeanyi Uddin on the Nigerian Economy and recession

Ifeanyi Uddin on the Nigerian Economy and recession

Managing monetary policy in trying times, By Uddin Ifeanyi

byIfeanyi Uddin
September 29, 2012
3 min read

RelatedNews

VIDEO: Nigeria to receive COVID-19 vaccines Tuesday – Official

Amidst COVID-19, Lassa fever death toll rises in Nigeria

COVID-19: One year after, Nigeria records 155,000 cases; 1,900 deaths

Osinbajo opposes cryptocurrency ban

ADVERTISEMENT

Arguably, one of the more Augean challenges confronting financial services regulation in the country today, is the ongoing transition in industry practice from bread-and-butter intermediation to what is now commonly referred to as “market-based” intermediation. In large part, this passage reflects the industry’s response to the competitive round triggered by its deregulation in the mid-80s. Supply (89, or so banks, then) confronted a peculiar market (structural bottlenecks in the economy meant that demand remained static. Even today, only a little over 53% of eligible nationals have access to formal financial services. Thus, operators have constantly sought to meet investors’ expectations of a return on their investments either through increasingly risky operations (“margin lending” in the run up to the central bank’s 2009 “special audit”), or non-traditional activities (as in the current dominance of treasury bills in most banks’ asset portfolios).

In result, even as most parts of the local financial services infrastructure is stuck in medieval times (the formal financial services sector is an adjunct to diverse “traditional” intermediation offerings between savers and investors), regulators are struggling to cope with the predictable (and unintended) consequences of (what the IMF refers to in its most recent Global Financial Stability Report as) “banks playing more of a nontraditional role by relying on fee-based income sources, trading activities, and non-deposit liabilities; a relatively large role for nonbank financial institutions in the inter-mediation process; and greater use of new financial products such as securitisations and derivatives”. Yet, unlike in other economies where a similar transition has taken place, in Nigeria, this efflorescence of new models and financing instruments has failed to broaden popular access to financial services.

Indeed, the adoption of novel intermediation models by banks operating in the country does not appear to have made the banking sub-sector any stronger, either. There are sub-narratives that give context to this, especially the argument around the extent to which the industry may be expected to rouse itself sustainably even as the rest of the economy is prostrate. We could engage endlessly this debate (its chicken-and-egg quality will guarantee a no less sterile outcome). Nevertheless, we can no longer ignore the fact that the sub-sector, and this in spite of the regulator’s best effort, appears condemned to lurch from one disaster to another. The central bank, through its resolution outfit (AMCON) only just finished infusing the sub-sector. Concerns over who bears the cost of this rescue operation have not been sufficiently attended to, and we are hearing new worries about the tradability of the sub-sector’s bond portfolio.

If the industry is not as healthy as the surfeit of mouth-watering profit figures that its operators have been releasing recently suggest, then we may be vulnerable to the de-stabilising effect of any shock (whether particular to one institution or of a systemic bent). Now, this is where things get nettlesome. Effective today, Nigerian government bonds will be included in J P Morgan’s government bond index. Consensus is that this should drive renewed interest in the country’s debt instruments. As it were, yields on domestic debt instruments trump anything that is currently available in Europe and North America. So the general expectation is that the economy will witness significant inflows of capital into the economy over the short-term. One estimate is of an inflow of close to US$1bn up to end-December 2012.

This higher inflow could have any of several effects. (1) It could push up the exchange rate of the naira. And (2), it could increase the rate at which the external reserves grow. On the other hand, the naira exchange rate bit could cut either way. In theory, by pushing up the naira’s exchange rate, it could affect the economy’s competitiveness. Local exporters could suddenly find it difficult to reach traditional markets. We are however considerably “lucky” in this regard: we produce very little that any other economy is interested in (besides crude oil, that is). Conversely, by lowering import costs (in an import-dependent economy), a “stronger” naira should help contain short-term pressure on domestic prices.

Still, we are concerned here with capital inflows at the short end of the market (“hot money”). So even when the central bank may yet contain these effects by issuing securities to “mop up” the additional forex liquidity, there is a danger of an asset price bubble inflating in the economy. This threat is that much more, if it is true that year-to-date, 80% of transactions on the floor of the Nigerian Stock Exchange have been fueled by foreign funds. The big bother is not so much that once again the economy may be susceptible to a shock, or a combination thereof. It is that this vulnerability might happen at a time when a central pillar of the financial settlement and payment system (the banks) is barely afloat.

  • WhatsApp
  • Tweet
  • Email
  • Print
  • Telegram
  • More
  • Share on Tumblr
  • Pocket

Support PREMIUM TIMES' journalism of integrity and credibility

Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.

For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.

By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.

Donate


TEXT AD: To advertise here . Call Willie +2347088095401...


JOIN THE CONVERSATION

  • Disqus (0)
premiumtimes



PT Mag Campaign AD

Previous Post

Nigeria to resume airlift of pilgrims, as Saudi Arabia insists on deportation

Next Post

JTF arrests Nigerian security operatives working for Boko Haram

Ifeanyi Uddin

Ifeanyi Uddin

Mr. Udin is Business Intelligence expert. He is a Member of Premium Times Editorial Board and a Columnist par excellence.

More News

Dr.-Mijinyawa-Bashir on Sheikh Gumi

Sheikh Gumi and His Blanket Amnesty Proposal, By Mijinyawa Bashir

February 27, 2021
Professor Bridget Teboh on Toyin Falola

Toyin Falola’s Golden Era, By Bridget A. Teboh

February 27, 2021
SKC Ogbonnia on why the Igbo must register for APC

The Igbo, APC and National Development, By SKC Ogbonnia  

February 26, 2021
Edwin Madunagu on the Nigerian Left

Further Notes To the Nigerian Left, By Edwin Madunagu  

February 26, 2021
Yemi Osinbajo on the finance system in Nigeria

Nigeria: Our Finance System Needs To Be More Forward-Looking, By Yemi Osinbajo

February 26, 2021
Osmund Agbo on political discrimination in Nigeria

Ruling Nigeria On Orwellian Terms, By Osmund Agbo

February 26, 2021
Next Post
Soldiers, Boko Haram gunfight leaves 10 dead

JTF arrests Nigerian security operatives working for Boko Haram

Of Phrank Shaibu, Ejiofoh, and what plagiarism is and isn’t, By Farooq A. Kperogi

Of Phrank Shaibu, Ejiofoh, and what plagiarism is and isn’t, By Farooq A. Kperogi

Discussion about this post

Search

#EndSARS: Latest Updates




Polaris Bank


JAIZ Ad


NITDA Ad





Glo Ad

Subscribe to News via Email

Enter your email address and receive notifications of news by email.

Join 1,625,869 other subscribers.

Advertisement






netherland biz school Advert

Zenith Advert
ADVERTISEMENT

Our Digital Network

  • PT Hausa
  • Election Centre
  • Human Trafficking Investigation
  • Centre for Investigative Journalism
  • National Conference
  • Press Attack Tracker
  • PT Academy
  • Dubawa
  • LeaksNG
  • Campus Reporter

Resources

  • Oil & Gas Facts
  • List of Universities in Nigeria
  • LIST: Federal Unity Colleges in Nigeria
  • NYSC Orientation Camps in Nigeria
  • Nigeria’s Federal/States’ Budgets since 2005
  • Malabu Scandal Thread
  • World Cup 2018
  • Panama Papers Game
  • Our Digital Network
  • About Us
  • Resources
  • Projects
  • Data & Infographics
  • DONATE

All content is Copyrighted © 2020 The Premium Times, Nigeria

No Result
View All Result
  • Home
  • COVID-19
  • News
    • Headline Stories
    • Top News
    • More News
    • Foreign
  • Investigations
  • Business
    • News Reports
    • Financial Inclusion
    • Analysis and Data
    • Business Specials
    • Opinion
    • Oil/Gas Reports
      • FAAC Reports
      • Revenue
  • Health
    • News Reports
    • Investigations
    • Data and Infographics
    • Health Specials
    • Features
    • Events
    • Primary Health Tracker
  • Agriculture
    • News Report
    • Research & Innovation
    • Data & Infographics
    • Special Reports/Features
    • Investigations
    • Interviews
    • Markets
  • Arts/Life
    • Arts/Books
    • Kannywood
    • Lifestyle
    • Music
    • Nollywood
    • Travel
  • Sports
    • Football
    • More Sports News
    • Sports Features
  • Projects
    • Panama Papers
    • Paradise Papers
    • Parliament Watch
    • AGAHRIN
  • Opinion
  • PT Hausa
  • The Membership Club
  • Dubawa
    • Dubawa NG
  • About Us
  • Advert Rates
  • Careers
  • Contact Us
  • Digital Store
  • DONATE

All content is Copyrighted © 2020 The Premium Times, Nigeria

Our website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.