Implement tough structural reforms – Afrinvest to FG

In order to recalibrate the nation’s economy towards the path of recovery and rebuild confidence in monetary policy, the Federal Government must be ready to implement tough but necessary structural reforms in 2017.

This was the highpoint of the report on the Nigerian Economy and Financial Market Outlook 2017 launched on Tuesday in Lagos by Afrinvest West Africa.

Presenting the report titled ‘Reform of Be Relegated’, at a press briefing, Managing Director, Afrinvest West Africa, Mr. Ik Chioke, listed one of the reforms as the passage of the Petroleum Industry and Governance Bill (PIB) into law as well as revolutionising the gas sector to enhance the gas-to-power network and resolution of the security challenges in the Niger-Delta.

The report, Chioke said, also identified the Power sector as another area in need of reform. “The whole process from the supply of gas to the Generating Companies (Gencos) down to the transmission of electricity to the final consumers as well as the cash collection process from the consumers through to the gas suppliers, needs to be revamped. Also, there is a need for debt and equity restructuring by players in the sector in order to sufficiently capitalize firms as the successful implementation of these reforms would make the sector more attractive for potential investors and as such the current liquidity crunch may be addressed,” the report said.

Mining is another sector the report listed as in need of reforms. Accordingly, the report posits that “removing mining from the exclusive list will give State governments the impetus to explore and develop their respective natural resources and also possibly foster interstate alliances. Likewise, this could possibly provide an avenue for States to boost their Internally Generated Revenue and will, in the long run, reduce dependence on revenue allocation from the Federal government”.

The report also identified the aviation sector as one that will present long-term benefits if necessary reforms are carried out.
“We believe the prospects of privatization of the Airports around the country should be considered as this will aid in the efficient operation of the airports, unleashing tourism and commercial potentials of the economy. This will also rid the FGN of the burden of maintenance and development of the airports which are currently in a deplorable state. These airports can be viewed as business hubs given the presence of shopping malls, restaurants, office complexes, etc,” the report opined.

Chioke in the report noted also that oil prices which had hitherto overwhelmingly driven Nigeria’s business cycle will play a reduced role in the medium term in 2017.

According to the report, the short to medium term outlook for the nation’s economy would be highly dependent on the ability of policy makers to deliver incremental oil output in 2017 while also reviewing the current structure of the currency market.
On the Nigerian Financial Market Highlights, the report stated that in view of the observed weaknesses in the economy, three key factors that will determine performance of the local bourse are as follows: (a) Central Bank of Nigeria’s resolve to fix the currency market crisis and close the huge gap between official and unofficial market rates once and for all; (b) Resolution of the on-going crisis in the Niger Delta region and its impact on oil production volumes as well as revenue; and (c) Significant structural reforms as part of the implementation of an economic recovery plan to restore growth.

The report suggested that favourable market-friendly policies, especially with regards to FX, need to be implemented while also striving to improve ease of doing business.

“Successful implementation of these reforms will improve the quality of lives of citizens, provide job opportunities, improve the quality of labour and Nigeria’s ranking will improve in line with United Nation’s 2016 Sustainable Development Goals (SDG) towards poverty alleviation. This will then make State Governments more economically viable than their current unsustainable parasitic structure. As a result, there is a need to bite the bullet once and “Put Nigeria first” by implementing the necessary reforms,” the report stated.