By Omoh Gabriel,
Nigeria delegation to this year‚Äôs IMF/World Bank annual meeting has presented Nigeria worsening power supply problem to the Bank and asked for technical assistance to develop strategy to fix the ever lingering power problem in the country. The Leader of the Nigeria delegation to this year‚Äôs annual meetings Professor Chukwuma Soludo CBN Governor disclosed this to journalist at a press briefing on Friday that the Nigerian delegation met with the Vice President of the World, Mrs Oby Ezekwesili to review the Bank‚Äôs portfolio on Nigeria which he said has attained 60 per cent disbursement.
He said the Bank assistance to the country has been favourable and that from the discussion with the Bank‚Äôs vice President for Africa, the multilateral financial institution was ready to provide technical assistance to develop strategy to deal the power sector problem confronting the country and how to get gas to the various power plant. He did not how ever give details on how it will be done.
He said ‚ÄúOn Africa generally, at the caucus meeting, we raise representation issue and Africa is likely to get a third Executive Director at the World Bank instead of two now, that is a positive development, but more than that African governors called on the bank to be a lot more proactive in terms of scaling up concesional loans that goes to African countries in terms of lending especially the ODA component and also ensuring that it gets to them in record time. In terms of financing agriculture the point was also made that it is a major priority area and that we needed to take this sector very seriously in much of Africa because it plays a leading role in poverty reduction. On the issue of voice and quota we generally agreed on the reforms at the IMF that would give increased voice and quota to Africa‚Äù.
Disclosing the activities of the Nigeria team at the Annual meetings Soludo said ‚ÄúHere at the World Bank we met with the Vice President of the Africa region, Mrs Oby Ezekwuesili and her team and we reviewed the Word Bank portfolio with Nigeria and the implementation so far. There is a disbursement of about 60 per cent. On the rate of performance it was agreed that more could be done and the bank also reiterated very importantly their readiness to assist Nigeria with technical assistance in crafting strategy for the power sector, and that they have worked closely with us even in the multi year tariff order and the issue of getting gas to power plants that they stand ready to offer much assistance that we may require in terms of the power sector and we generally requested for a lot of things.
‚ÄúI think over all it has been a good day for us as a country, and for Africa generally. For me the litmus test far all these meetings is what is in it for Nigeria. For me if I walk into any meeting what is in my mind is what is in it for Nigeria other wise it is a jamboree if there is nothing for the country‚Äù
Speaking further on the meeting held so far he said ‚ÄúThese are still pre-meeting; and several meetings were held today, we held the African constituency 1 meeting, and as you could see unfortunately the Honourable Minister of Finance is not here but here I am, and with me are the Deputy Governor of the Central Bank Dr. Mrs Alade, Mr. Alao, A director in International Economic Relation at the ministry of Finance; and Professor Monye who is the secretary to the National Planning Commission representing Nigeria. We will put in every thing to represent Nigeria as effectively as we can and as possibly could be.
‚ÄúWe have several meetings pre- meetings, the first was a set of meetings on Africa as regard how we trying to put our house in order in the way we do things, we had the Africa constituency 1, which we belong to, that is the first meeting held at 8 o clock this morning, then the G 24 meeting, the Africa consultative group meeting before launch; and the African Central Bank Governors launch with the Director African region as well as the 1st Deputy Managing Director.
‚ÄúWe had a meeting with the Vice President of the World Bank African Region Oby Ezekwuesili and her team on Nigeria, and we have just finished the African caucus meeting where all the governors from Africa had a meeting. If I may just put it succinctly, the key messages of these meetings are the major concern as to what has happen to the international community the current global financial crisis, the energy crisis, food crisis, you know before this financial crisis we had two interrelated crises; the energy crisis in terms of the galloping oil prices as well as the food price crisis. These have not gone away and in addition to those, added the financial crisis. And in several of these meetings these are the issues as to how the global economy is being affected by all of these. How developing countries are being affected, Africa in particular where are we and what are the mitigating factors , how are we responding, and how could things work better. These are the major issues that have come up. I think when it pertains to the nature of the crisis there is no question that there is a broad implication that people recognise as of historical proportion so to speak.
‚ÄúMost industrial countries are terribly affected and that tells you the extent to which the global economy has become integrated and as you may have heard a lot of the markets have been affected and about 13 markets today had to close. A lot of the markets in developing countries are hail and hearty, except for the contagious effect, there is what Kaynes called the animal spirit that might cause people to behave in ways that might tend to be irrational but makes sense to them as individuals or the so called head instinct when every body is running you just start running is n‚Äôt when you walk down the street and everybody just start running in your direction and no body has time to explain to you why they are running you first of all join in the race and when you people stop you start asking why were we running.
‚ÄúThis is a major thing in the Nigeria case. When the meltdown started most people never understood what was going on people were looking for excuses may be they stop margin trading, may be it is common year end etc. What happened was that institutional investors who were facing credit crunch in their home markets divested from the market and prices fell. That was the first shock. And once prices fell every body began to sell. The remaining investors panicked and started selling and banks also panicked and started recalling existing facilities they had given to people to buy stocks and they stopped lending to people to buy stocks. Then people started saying CBN has stopped them from lending for margin trading, no there was northing like that.
‚ÄúThis is what is now going on in the rest of the world that is of serious concern. Globally industrial countries are likely to go into recession as a result of the consequences not only of the financial crisis but economic crisis because when people can not get credit, what happens is that it doff tails into so many other things, domestic consumption will come down, the credit limit that people are going to get on their credit card falls and people will consume less and that plunges the economy into recession.
‚ÄúThere is that concern; on Africa and the developing world the impact will vary depending to the extent their markets are integrated with the rest of the world. But more fundamentally, almost every body will be affected one way or the other. So far as you have trade links commodity prices are going to fall because of declining demand in the major markets and with the fall in commodity prices their will be reduced income for Africa countries, already we have seen a 40 per cent fall in crude oil prices. It is about $80 and if you will recall we went above $120; Other commodity prices copper, cocoa are going to be affected as the global demand falters‚Äù.
Another effect is reduction in capital inflow. He stated ‚Äú Then also capital flows into developing countries will also be affected and these will have consequences generally for investment and growth in most places.
‚ÄúThe good news from my own point of view for Nigeria is that what the world is doing today is as if we saw the crisis coming some three four years ago and what the world is doing today is what we did then, they are now consolidating, recapitalising banks, mergers and acquisition are taking place, even what we proposed during consolidation that we should set up an asset management company to take up the bad asset of ailing banks that is what developing economies are setting up hundred of billion of dollars to do, luckily we took pre-empty move in the case of Nigeria, we did not wait for banks to fail before liquidyfing the system. I doubt if there is anybody in Nigeria who is fearful of his money in the banks. If we had not done what we did then you know the non performing loans as a percentage of total loans was in the region of 23 per cent almost near to 25 per cent that was a trigger off at a level you say there is a systemic crisis. If we had not done that and all of a sudden the credit line of these banks dried up and they face a liquidity crunch as it where and the stock market melt down, then the portfolio of these banks, their provisions, for bad loans will be such that with little capital many of them would have gone bankrupt by now. 11 countries are consulting us on how to handle their crisis
‚ÄúAt the African consultative meeting, the major issue was on inflation. Inflation is beginning to inch up in Africa averaging 14 per cent, and I think we spent much of the time discussing how we are managing the inflationary challenges in monetary practice in Africa and we did make it clear that it will differ from country to country and it will depend on specific circumstances.
‚ÄúIn the case of Nigeria for example financial system stability is the first order of priority. Inflation is of second order especially in the context that core inflation, as at the end of August was about 3.9 per cent that is non food inflation that is within range that is why we have provided liquidity for the banking system.