RIMAN urges diversified forex earnings, improved risk management
• KPMG charges CBN to streamline forex market for transparency, others
From the nation’s professional risk managers comes urgent appeal to the government to redouble efforts towards diversifying the foreign exchange (forex) earnings capacity of the country.
Under the aegis of Risk Managers Association of Nigeria (RIMAN), they said it would help the country survive and forestall future occurrence of the ongoing economic crisis that is associated with fall in revenue and forex inflow.
The President of RIMAN, Jude Monye, at the group’s meeting in Lagos, said he is optimistic the country will get out of the recession because the fundamentals are being put in place now by government.
Meanwhile, KPMG Professional Services has stressed the need for the Central Bank of Nigeria (CBN) to streamline the foreign exchange market to a single platform to enhance transparency and price stability.
Monye said: “The challenge we are having today is our earning capacity as a nation. We are an import-dependent country. And once your earning capacity dwindles as a result of our mono-product export, it becomes difficult.
“The economy is still good for investment and if anything, this is the right time for anybody to invest. The fundamentals of our economic growth are there- agriculture, mining and many areas of growth potential are available.
“The banking sector is not different from every other sectors of the economy. If all other sectors are challenged, then the banking sector will also be challenged. But it is about what is the level of the challenge the banking sector has. But the challenge is not something we cannot overcome.
“The banks have kept moving on, bringing out innovations in terms of products. Cost-cutting has come in, unnecessary expenses have been cut down in terms of air travel expenditure, flamboyance and lifestyle.
“Today, banks are doing proper banking that should be done. And I think Nigerian banks were very much on course. The hope of our economy today is the banking sector. I’m glad the Central Bank comes out once in a while to tell the public that the banking sector is sound and safe.
But the Partner at KPMG and Trustee member of RIMAN, Olumide Olayinka, said risk awareness is so low in the country, even at governmental level, adding that if adopted, it would help to minimise their losses and optimise the risks.
Noting that RIMAN is ready to help, which informed their routine meetings, he said there is value in taking risk management capacity building beyond banks to food and beverage, agriculture, aviation, construction and every sector of the economy and even make it a practice.
“We also know that the economy is in recession for a number of reasons. There was a commodity risk that we are faced with – crude oil. We knew that we are a mono-product economy, and that was the risk we overlooked and today, it has crystallised into a recession.
“In other clime, what they’ve done is when the price of oil was high, they saved; they had a huge sovereign fund that they could be used during a period like this. Again, those are the kind of principles that risk management would teach that there will always be ups and downs,” he said.
According to him, we did not feel it this much in 2008, because the oil rebounded very quickly, but this time, even after three years, it hasn’t rebounded. This means we didn’t put things in place to diversify foreign exchange earnings.
“But risk management techniques will tell you don’t do that. In fact, anything more than 20 per cent of concentration is not very good for you. That’s what has happened in Nigeria.
“Nigeria is still at the early stage of adoption of risk management. If not, we shouldn’t be where we are. We didn’t even hedge our risks. “The economy is diversified but the foreign earnings isn’t diversified. That’s an area we need to look into. The other thing is foreign currency management to ensure that we build confidence because without it, there would still be issues.
“Government should not pay lip service to agriculture. We have to do things that will engender investment in agriculture. We have to create an investment environment in agriculture and agro-allied which will create a lot of employment in Nigeria.”
If banks had put in place additional risk mitigants, he said, the rate of default would have been minimised, but what happened in some companies with higher risk default is that they haven’t listened to risk managers.
“Yes, you cannot tell banks not to lend because that would mean telling them not to do business. But to lend with the right risk management discipline, would be my advise,” he added.