ERGP: Economist advises FG to create friendly environment for investors
NAN-HE-13
Investors
By Cecilia Ologunagba
Abuja, Oct. 12, 2017 (NAN) An economist, Prof. Segun Ajibola, has advised the Federal Government to accord priority to friendly business environment for investors in implementing the Economic Recovery and Growth Plan (ERGP).
Ajibola gave the advice in an interview with the News Agency of Nigeria (NAN) on the sidelines of the on-going 23rd Nigeria Economic Summit (NES#23) in Abuja on Thursday.
Ajibola, President/Chairman of Council, Chartered Institute of Bankers of Nigeria, said that what defined conduciveness was policy stability, rather than policy somersault.
“If an investor knows for certain that he is coming to invest under these terms and conditions that are stable and predictable, he can come freely and go when he wills.
That will facilitate business, so government must ensure that there is stability in the system through stability in policy making and implementation,’’ he said.
Ajibola, who commended the Federal Government for stability in Foreign Exchange rate, said the effort would also boost foreign investment.
He, however, called on the government to sustain the Foreign Exchange Policy.
“If the Foreign Exchange is unpredictable, its unpredictability will scare away foreign investors.
“Also, the issue of infrastructure is very key; if we can address the issue of infrastructure, it will go a long way in enhancing economic growth,’’ he said.
In addition, he advised the government to ensure access to funds, saying “ access to finance covers a lot of areas, including borrowed funds and intervention funds”.
“If there is access to finance, you will not be forced to devote a sizeable proportion of borrowed funds to provide basic infrastructure like power, road, security etc.
“You will be able to consecrate the funds on the real projects and you will be able to make some impact and contribution to overall performance of the economy either in terms of growth or by extension development.’’
Ajibola, Dean, College of Postgraduate Studies, Caleb University, Lagos, also advised the government against borrowing to fund overhead costs.
“The problem is when government borrows to fund super structure that will not add value to the economy and will not promote growth, it is not a good borrowing.
“Now when we talk about government borrowing, like the Treasury Single Account (TSA), which government took away money from the system to the CBN.
“The question is if the funds were in the hands of government, why is government borrowing from the domestic economy?
“Why is government borrowing through the issuance of treasury bills at this very high rate? It borders on the template the government is operating at the moment.
“Where-in we have deficit financing, government needs money from every segment to fund the 2017 budget; that is overheating the system and inflation remains untamed,’’ he said.
According to him, if inflation is high and borrowing is not spent properly, it will cost another problem in the economy.
Ajibola said those issues would create problem for the Small, Medium and Enterprises (SMEs), noting that the cost of borrowing and inflation was too high for business to boom.
“As economist, I will not put my money ordinarily in the hands of any of commercial banks below the inflation rate; when you do that, the real rate of interest is negative.
“ So, for you to have zero rate of interest, the rate that is being offered by the bank must merge the inflation rate which is not happening now.’’
He, however, said that there was nothing bad about the country to borrow but the problem would be how to use the borrowed funds.
“What is the net impact of the borrowing on the overall state of the economy?
“If government ploughs it back to productive areas of the economy; it will be great.
“If that is done, we will have multiplier effect reflecting on every set of the economy, including SMEs.
“ Nevertheless, if you give some businesses free of charge in this environment today, if these issues and other issues surrounding them cannot be addressed, it will be the same story,’’ the experts said.
He, however, urged all economic agents and stakeholders to address the problems simultaneously as basket not in silos.
“For example, the issue of infrastructure; if government mopes up money from the system via TSA and we can see that it was used for the provision of infrastructure, electricity and roads, it would have reduced operation cost of these various institutions and agencies that are active in one economy activity or the other.
“But we have not seen this happening.
“All the stakeholders must address the issue that pertains to these areas,’’ he said.
Ajibola said that financial institutions should provide funding; agencies of government should play their part and also private sectors.
He said that private sector should be engaged through Private Public Partnership in terms of infrastructure, security etc to tackle the problems.
“If all the economic agents give themselves time in the next three years, they must have addressed the problems,’’ the economist said. (NAN)
CIA/IA
(Edited by Idris Abdulrahman)