By Taiwo Osho
The Institute of Chartered Accountants of Nigeria (ICAN) has thrown its weight behind the CBN policy to restrict Ways and Means to the government.
ICAN President, Dr Innocent Okwuosa made the disclosure while fielding questions from journalists during his Presidential chat on economic issues in his office on Monday in Lagos.
He lamented the alleged revelation of N30 trillion the past administration incurred through Ways and Means which is being investigated by the Senate. Okwuosa, welcomed the inquiry by the upper legislative chamber, called on CBN Governor, Yemi Cardoso to learn from the mistake of past CBN.
ICAN President said, “Our expectation is that with the new administration, borrowing will be a thing of the past. However, I will advise CBN should continue to extend Ways and Means to the government but the CBN itself has stated that it will not continue to extend Ways and Means to the government. In fact, this is a good policy from our perspective. So, if CBN should stick to not increasing Ways and Means that it gives to government, that’s a policy that we support.
“I think it’s a Fiscal Responsibility Committee that placed a limit what Ways and Means percentage would be. I think it’s something around five percent. When CBN exceeded this, people kept quiet. People should have spoken so that CBN does not continue to exceed this limit. Now, it is not five percent, we are talking about 30 trillion, that’s huge. I understand it’s been converted into bond.
“But one good thing we support is the fact that the Senate has instituted an inquiry into those Ways and Means. I would guess that the investigation would lead to more revelation and would be a lesson which the present CBN would learn from and would not go into the mstake of the previous CBN.”
Okwuosa urged CBN to seek alternative means to support government deficit financing and discontinue increasing Ways and Means to the government.
He said, “They could go to the Capital market and tie them to projects because each time you have government deficit, it must be as a result of not having fund that can back a project. So, we want to raise funds for such a project, we do that in the Capital market and tie it specifically to the project that we couldn’t provide for funding in the budget. I think that’s the way CBN should go.
On the unification of forex, Okwuosa posited that it is not favourable to the economy because the country is import-dependent. He therefore called on government to address production of more crude oil and stimulate manufacturing sector and promote export of agriculture products.
He stated, “When government introduced the policy of fixing the rate unification, we all applauded them because of the fact that it would remove distortion in the economy. And when we did that in the hope that government should then take other steps to correct whatever adverse effects would come out of that.
“Many months down the line, we are beginning to see that the unification, though a good policy, ought to have been backed up by other measures. And these other measures are yet to be seen. You do not unify an exchange rate when you are import-dependent nation. Unification, in the first instance, would lead to devaluation of currency in the case of Nigeria.”
He disclosed further, “Those who devalue currency are those who have products to export because when you devalue your currency, it becomes cheaper. And if you export, it would incentivise exporters to export more. But in a situation where you are import-dependent and your exchange rate goes off that would affect even production because the manufacturers depend on imported machineries that are going to go up. So, the exchange rate has been going up after unification simply because we do not have enough supply.
“And we think that effort should be made to increase supply and increasing supply, we need to address the source of foreign exchange by Nigeria. And the source of foreign exchange happens to be crude oil, it is about 90 percent of our foreign exchange earnings. And so if anything happens in the oil sector, it would impact on our foreign exchange. Yet, we have still not been able to meet production quota allocated to us by OPEC.”
According to him, government should introduce policy around consume what you produce, to checkmate reliance on imported goods for consumption.
Okwuosa viewed that Nigeria will earn more forex If the nation promotes export African countries and take advantage Africa free continental trade agreement.
“But if we can also promote trade in Africa, assuming we cannot export to Europe, we can export to Africa since we have Africa Continental Trade Agreement that has come in place, can be utilised. We need to utilise it more. I think a combination of all these will increase foreign exchange for us and we begin to impact on the exchange rate,” he added.
