Federal Government’s implementation of the Structural Adjustment Programme (SAP), has hampered the growth of the private sector which it is meant to promote a renowned Economist Mr. Pius Okigbo has observed.
Dr. Okigbo who spoke at the occasion of honouring Mr. Oladele Olashore with the award of Banker of the Year yesterday picked holes on the monetary policies of government which is main policy instrument of SAP.
He said that such policies are “slowly crushing the entrepreneurial class and compelling a massive redistribution of income from the business class to government.
He noted that with the deregulation of interest rates for instance, the regime of interest rates now obtaining is unparalled in the banking history of Nigeria.
A borrow today, he said has to calculate on a return of no less than 30 to 40 per cent on his investment in order to carry the service charge of loans from the banks.
In effect, only the federal government can borrow on the prevailing terms as it can swap one for another by the regular issue of bonds. And with the illiquidity in the banking system, it amounts to the the federal government heavily from the Central Bank.
He further warned that if the monetary authorities are not careful, the interest rate management will force the private sector out of existence and Nigeria would revert to what it was pre-1950 into a nation of farmers and traders with government being the only one in big business.
He regretted that the banking system is being used a sa instrument to effect the marginalisation of private sector, and therefore, called on banks to pull the country out of the present dilemma by redrawing the margin between cost of funds to them and the price at which they sell them.
Dr. Okigbo further observed that with the present value of the naira at about four naira to a dollar, the naira is grossly undervalued. He said that the exchange value of a currency is determined, among other things, by the terms of trade that is looking at the level of exports of goods and services and imports of same to find the range of values wherein the local currency naira will exchange for th foreign one.
On the basis, he pointed out that the more “realistic” value of the naira after making provision for build up of reserves, will be closer to N2 or N2.5 than to N4 per dollar.
