Search Site: OnlineNigeria

Close






IMF:CBN Needs Legal Powers to Shut Insolvent Banks: Raises concern on 2005 expansionary fiscal policy

Posted by By Samuel Famakinwa on 2005/08/11 | Views: 354 |

IMF:CBN Needs Legal Powers to Shut Insolvent Banks: Raises concern on 2005 expansionary fiscal policy


The Executive Board of the International Mone-tary Fund (IMF) has advised the Central Bank of Nigeria (CBN) to strengthen its legal powers to close insolvent banks and enhance its banking supervision in view of the on-going consolidation exercise in the country.

The Executive Board of the International Mone-tary Fund (IMF) has advised the Central Bank of Nigeria (CBN) to strengthen its legal powers to close insolvent banks and enhance its banking supervision in view of the on-going consolidation exercise in the country.

Expressing its views and analysis of economic developments and policies in Nigeria yesterday, the Fund’s Board also “expressed concern about the expansionary fiscal policy stance in 2005 and consequent larger non-oil deficit, which could complicate the management of monetary policy, lead to spending inefficiencies, and crowd out export activities and private investment.”

It expressed regret and the deterioration in the financial condition of some banks in 2004, and noted that major challenges remain for promoting a healthy and vital financial sector. The IMF also urged the apex bank to develop a strategic plan to deal with banks that will not meet the minimum capital requirement of N25 billion at the end of 2005.

Giving its assessments of the Article IV Consultation concluded with Nigeria last July, the IMF Executive Board welcomed the measures taken by CBN in respect of the capitalization program and the recent establishment of a high-level steering committee to guide the bank restructuring and consolidation program.

It called on the authorities to ensure that sound accounting standards are applied in valuing banks' assets, and to advance the legal processes for establishing asset management companies to minimize the budgetary costs associated with liquidation of some banks.

While it supported CBN’s request for IMF technical assistance on the banking reform program, the Board welcomed progress made in strengthening the anti-money laundering framework with the establishment of a Financial Intelligence Unit in the Economic and Financial Crimes Commission (EFCC).

The IMF Board also called for steps toward reform of Nigeria's foreign exchange markets which, it said, remain segmented and a source of distortions.

In this vein, it welcomed the CBN's commitment to introduce a wholesale auction for foreign exchange in early 2006, which should unify the exchange system.

“The CBN should expedite work to put in place the necessary infrastructure and regulations for the auction. Directors urged the authorities to further streamline current foreign exchange regulations and to take the steps necessary for accepting the obligations of Article VIII of the Fund's Articles of Agreement”, the Fund said.
According to the IMF, “Nigeria's economic transformation continues to face formidable challenges, owing to weak institutions, administrative and technical capacity constraints, resistance from entrenched interests, and the legacy of decades of economic mismanagement.”
However, while encouraging Nigerian government to persevere in her efforts, build on the progress made in 2004 and broaden the reform agenda, the Fund observed that a prudent fiscal policy in 2004 had contributed importantly to the macro-economic stabilization effort. From that perspective, IMF expressed concern about the expansionary fiscal policy stance in 2005 and consequent larger non-oil deficit, which could complicate the management of monetary policy, lead to spending inefficiencies, and crowd out export activities and private investment.
According to the Board, “these potential consequences of the planned loosening of the fiscal stance made it all the more important to strengthen public expenditure management to ensure that public spending helps achieve the NEEDS objectives and the Millennium Development Goals.”
In this light, it welcomed the establishment of a virtual poverty fund to track poverty-reducing spending and the creation of a cost-benefit analysis unit in the Ministry of Finance to examine large investment projects.
The Fund also called on the Federal Government to further improve budget classification systems to enable adequate monitoring of the pro-poor and growth-supporting aspects of the budget.
“Directors welcomed the provisions of the Fiscal Responsibility Bill, which, if passed, will enhance fiscal transparency and accountability at all levels of government, introduce formal fiscal rules into the budget process, and lay the foundations for medium-term fiscal sustainability. They took note of the authorities' efforts to garner broad support for the Bill in the National Assembly.
“Directors emphasized that, in the light of the fiscal expansion, more of the burden of controlling inflation would fall on the Central Bank of Nigeria (CBN). Given the sharp increase in monetary aggregates in early 2005, Directors supported the recent actions of the CBN to limit broad money growth.
“They welcomed progress in relying more on indirect instruments of monetary management, and urged the authorities to allow short-term interest rates and the exchange rate to adjust as needed to meet the monetary targets. Directors concurred with the authorities' intention to continue with money targeting as the operational framework for anchoring inflationary expectations.
“Several Directors recommended that the authorities consider moving to an inflation targeting regime in the shortest possible time after appropriate preparations and contingent upon a strengthening of the financial sector”, the Board stated.
The IMF Board also considered that the Federal Government’s ambitious structural “reform agenda is focused appropriately on strengthening governance and transparency, enhancing public service delivery, streamlining the role of government in the economy, and improving the business environment.”
IMF welcomed the revamping of the Bureau of Public Enterprises (BPE) and encouraged Nigeria to expedite the overall pace of privatisation, bearing in mind the need to rally public support for it.
Besides, it welcomed the emphasis on broad-based participation in advancing the country's commitment to improve transparency in the oil and gas sector under the Extractive Industries Transparency Initiative (EITI).
IMF commended Nigeria's strong economic performance in 2004 under the homegrown reform program, as articulated in the National Economic Empow-erment and Develop-ment Strategy (NEEDS).
It noted that a number of key priorities of the program have been achieved, including enhanced predictability and transparency of policies, growth in the non-oil economy including the agricultural sector, and reduced vulnerability to oil price shocks.
Moreover, it said, fiscal restraint allowed much of the oil windfall to be saved in 2004, resulting in lower inflation and a sharp increase in international reserves.
“Directors supported the authorities' tariff reform program, as lower tariffs will benefit Nigeria's international competitiveness. They commended the authorities' intention to phase out all import bans by end-2006 and fully adopt the ECOWAS Common External Tariff by end-2007, but recommended that the timetable for implementing these reforms be accelerated.
“Directors were encouraged by the readiness of Nigeria's external creditors to negotiate a comprehensive debt relief agreement with the country.

“Directors stressed the importance of improving the reliability and timeliness of economic statistics to better support the formulation and monitoring of macro-economic and social policies. To this end, they welcomed the recent merging of the Federal Office of Statistics with the National Data Bank to create the National Bureau of Statistics.

“All Directors welcomed a continuing close dialogue of the Fund with Nigeria on policy formulation and implementation, in the most appropriate and effective form, including in the context of a possible non-borrowing relationship”, the Public Information Notice stated.


Read Full Story Here.... :
Leave Comment Here :



Add Comment

* Required information
1000
Captcha Image

Comments (13)

Gravatar
New
Ikheloa Ezekiel(Ekpoma, Edo, Nigeria)says...

Ikheloa is a Nigeria native name it given to people from esan in edo state which means caretaker

Gravatar
New
Willemsays...

No freaken way, how the hell do i hear the airtime balance update on my phone from the other caller, or maybe it was put on loudspeaker

Gravatar
New
Ulunma akor(Imo, Lagos, Nigeria)says...

Ulunma means beautiful second daughter

Gravatar
New
PAPA JAMES(US)says...

Do You Need A Powerful Africa Native Doctor? I Mean A Spiritual Herbalist

With Great Spirit Connected To Ancestors. Call +2349053014785 Dr omonzokpia

James Is A High Voodoo Priest Master. He is a Spell Caster, Native

Doctor, Spiritual Herbalist, Powerful Sickle cell Healer, Spiritual

Astrologer, Psychic Reader, Multi Guru, Witch Doctor, Priest Of Africa

Money Ritual

Gravatar
New
Kim Worley(Greeley, Colorado, US)says...

I heard this in a song and had no idea what it meant. Googled it and this came up. Very Cool. ????????????????