AfDB backs Tinubu over forex rate Unification 

African Development Bank (AfDB) yesterday in Abuja commended the President Tinubu administration for unifying the naira exchange rate saying it would breath air of transparency into the foreign exchange (forex) market.

Its President, Dr Akinwumi Adesina, spoke in Abuja at the 2nd Edition of Nigeria Employers’ Summit, the unification of the exchange rate was a major reform, adding that the country’s revenue to Gross Domestic Product (GDP) ratio, at about eight per cent, was among the lowest globally.

He said Nigeria is currently facing huge fiscal deficits, estimated at six per cent of GDP attributable to high public expenditures amidst dwindling revenues from crude oil exports..

The theme of the Summit was: “Trade and Non-Oil: Changing the Narratives for Rapid National Development“.

Represented by AfDB Director-General, Nigeria Country Department, Mr Lamin Barrow, he said: “The unification of the exchange rate management system is an important reform by the new administration that will enhance transparency in the allocation. And access to foreign exchange, as well as eliminate distortions to boost export competitiveness.”

Adesina said a vibrant and competitive private sector has the potential to accelerate diversification of economy and boost exports.

He said the private sector development in Nigeria was however hamstrung by policy inconsistencies and implicit taxation.

The AfDB president said it was unfortunate many private sector firms in Nigeria were overburdened by implicit taxes.
Adesina said the companies provide their own electricity, sink boreholes to get access to water and repair roads around their places of operation.

“It is therefore not surprising that foreign direct investment (FDI) inflows have decreased from $8.8 billion in 2011 to only about $469 million in 2022, the lowest in a decade,” he said.

He said closer collaboration and dialogue between the Federal Government and the private sector was necessary to chisel out strategies that would position Nigeria as an ideal investment destination.

He further said Nigeria could also benefit from the experience of countries that have been successful in attracting FDI into their manufacturing sectors.

“Nigeria can become a manufacturing hub in Africa if the Federal Government implements a bold strategy to take advantage of investment and market access opportunities.

“Rising labor costs and technological upgrading in countries such as China, India, and Brazil offer an excellent opportunity to developing economies, including Nigeria, to attract FDI and diversify their exports.

“Promoting trade and regional integration trade offers a great opportunity to further diversify the Nigerian economy.

“With the coming into force of the African Continental Free Trade Area, Africa is becoming more integrated, with a larger market for exports from Nigeria,” he said.

Adesina said Nigeria faced major infrastructure deficits that inhibit its ability to diversify production in the non-oil sectors.

Citing the World Bank’s 2022 Public Expenditure Review report, Adesina said that meeting Nigeria’s huge infrastructure needs required 3 trillion dollars by 2050.

He said at the current rate, it would take Nigeria 300 years to provide a minimum level of infrastructure needed for development.

Adesina, however said to change this narrative, Nigeria should mobilise the private sector for infrastructure development and service delivery.

He said this would also reduce the fiscal burden on the Federal and State governments.

According to the president, energy sector investments remain one of the most critical and urgent needs in Nigeria.

He said providing reliable and affordable energy services would make Nigeria’s industries more competitive and accelerate the country’s integration into regional and global supply chains.

“To remove the barriers to non-oil trade and exports, Nigeria must decisively fix its power sector, once and for all.

“While tapping its abundant gas resources as a transition fuel, Nigeria should invest massively in renewable energy generation, especially solar.

“Nigeria should start leveraging the platform of the $25 billion Desert-to-Power initiative aimed at providing electricity for 250 million people across the Sahel, including the northern parts of Nigeria,” Adesina said.

The AfDB boss said developing regional infrastructure and putting in place the requisite trade policies were necessary conditions for tapping into opportunities in regional and international markets.

“A good starting point is the effective utilisation of Trade Agreements to which Nigeria is currently a signatory. Nigeria’s trade policies should prioritise the promotion of value-added exports,” he said.

The AfDB boss listed other measures that should be prioritised to include improving tax collection and tax administration, plugging leakages in tax collection and enhancing the efficiency of public investment programs.

He also noted that the agriculture sector’s contribution to the GDP remained important and provided a sure route to sustainable revenue generation and driving transformation of the economy.

“’However, labour productivity in the sector measured by agriculture value added per worker, has remained stagnant around $5,500.

“’Nigeria remains a net importer of food in spite of generous endowment of arable land and a favorable climate in many parts of the country.

”Between 2010 and 2020, the annual food import bill averaged $6.4 billion while food exports averaged $1.2 billion over the same period.

”One way to accelerate the development of agro-industrial value chains is by unlocking the opportunities in the sector.

” Including by developing and de-risking of agricultural value chains and attracting private sector food and agribusiness firms into rural areas,” he said.

According to Adesina, the AfDB is supporting the implementation of a $518 million Special Agro-Industrial Processing Zones’ (SAPZ) Programme in seven States and the Federal Capital Territory.

He said the bank was doing this together with its Partners, Islamic Development Bank (IDB) and the International Fund for Agricultural Development (IFAD).

He said there are strong interest from 20 other states, which would be supported in the second and subsequent phases.

”Through SAPZs, smallholder farmers can evolve into thriving agri-business through a combination of measures including market linkages, technology transfer and improved access to finance and other inputs,” Adesina said.