Thriving Despite Security Challenges

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Olusegun Aganga, minister of industry, trade and investment

Despite the security challenges facing it, Saratu Umar, executive secretary of the Nigerian Investment Promotions Commission, says the country’s economy is still thriving

By Anayo Ezugwu  |  Sep. 8, 2014 @ 01:00 GMT

THE Nigerian economy is still thriving despite the security challenges facing the country. This is the assertion of the Nigerian Investment Promotion Commission, NIPC. Saratu Umar, executive secretary of the commission, who stated this in a keynote address entitled: “Translating Nigeria’s Foreign Direct Investment, FDI, Benefits into a Reality,” at the Nigerian Economic Summit Group, NESG, in Abuja, said the country’s economy has shown a strong resilience in spite of the security concerns. She stressed that the NIPC was reviewing the pioneer incentives currently being granted to investors to cover only critical activities.

According to her, the NIPC is ever poised and positioned to give a hand-holding support to investors (both local and foreign) that have decided to make the country their preferred investment destination, adding that the Commission was putting various strategies in place to make it more pro-active to investors’ needs and demands. She explained that the “NIPC is a private sector company within the Government, as such, it has a big role to play in the economic growth and advancement of Nigeria. The NIPC is one of the strong vehicles to drive investment into the economy and it is being re-engineered for better service delivery.”

Umar noted that being the largest economy in Africa, Nigeria is consistently among the top three investment destinations on the continent. “Government remains committed to a transparent, fair and peaceful electoral process as the country is now on the threshold of its fifth democratic transition process, and is building efficient socio-economic infrastructure and strengthening the financial and insurance sector.”

She further stated that government has continued to sustain the simplification and streamlining of business entry procedures as the One-Stop Investment Centre, OSIC, of NIPC and “is providing a platform for coordinated service delivery and that the Corporate Affairs Commission, CAC, is committed to 24 hours incorporation of businesses across the country.” In ensuring a globally competitive business regulatory framework, she stated that the federal government was committed to setting up “a rule-based regulatory framework across all the sectors that is devoid of discretion and a national competition and a Consumer Protection Policy is at advanced stages of adoption.”

The NIPC boss maintained that the council has continued to contribute immensely to the Gross Domestic Product, GDP, and the National Product in various ways. According to her, it enhances the country’s export potentials, promotes import substitution industrialization, facilitates skills enhancement and human capital development, improves Nigeria’s international image, facilitates technology acquisition transfer, increases capital stock and enhances market development and increased tax generation.

Meanwhile, the federal government and the Financial Regulatory Authority may tap into the G-20 proposal that will require the top banks in the country to issue special bonds as capital that can assist them in times of crises. In the international financial community, government leaders are expected to agree in November after the International Monetary Fund, IMF/World Bank meeting in October that the world’s top banks must issue special bonds to increase the amount of capital which can be tapped in a crisis instead of calling on taxpayers to come to the rescue.

The bonds, to be known as Gone Concern Loss Absorption capacity, GLAC, are seen by regulators as essential to stopping the world’s biggest lenders from being too big to fail. According to international financial sources, the plans are being drafted by the Financial Stability Board, the regulatory task force of the Group of 20 economies which declined to comment ahead of a G20 summit in November, when G20 leaders woul discuss the reform before it is put out to public consultation.

The reform would put in place the final major piece of G20 regulation on banking as the global body turns to a “post-crisis” agenda of fostering economic growth and bedding down the rules it has approved. There had been unease in Asia and parts of Europe over how big the bond issues need to be to provide this cushion but there is now a new optimism amongst bankers and regulators that the G20 would reach a deal in November. “The industry is definitely in favour of making resolution, supported by an appropriately flexible concept of GLAC, work. That is the key pending aspect on ending too-big-to-fail,” said Andres Portilla, director of regulatory affairs at the Institute of International Finance, a Washington-based banking and insurance lobby.

“What is likely to happen is that there will be a consultative proposal, but without all the detail that a lot of people would like,” Portilla added. However, a G20 source said a deal was not only expected but would also be more detailed than some parties anticipate, which is essential for conducting a thorough impact assessment before finalizing the rules. The authorities and the FSB are working to have a proposal that will contain sufficient granularity of numbers to be a meaningful consultation and quantitative impact study to calibrate the final rule,” the source said.

Top banks expect they will have to hold GLAC bond capital equivalent to about 10 per cent of their risk-weighted assets on top of their core capital buffers which currently stand at around 10 percent. But they hope for some leeway if they can show that they can already be wound down smoothly in a crisis because of simplified structures. The G20 source poured cold water on this, saying regulators believe all the world’s top 29 banks earmarked for tougher supervision will need a significant cushion of such so-called “bail-in” bonds for some time to show they can be shut without public aid.

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