Communique from Dec. 15,2016 Breakfast Meeting


THE COMMUNIQUE FROM THE ASSOCIATION OF CORPORATE TREASURERS OF NIGERIA (ACTN) MAIDEN BREAKFAST MEETING HELD IN DECEMBER 15, 2016



BACKGROUND

The maiden breakfast meeting of the Treasurers of the corporate sector was held in Africa & Asia Room of the Eko Hotels & Suites, Lagos on Thursday 15th December, 2016. The theme of the Breakfast meeting was “The Economic Outlook for 2017”, with panel discussions on Currency, Funding and Liquidity Management.

The Keynote address was delivered on behalf of the Deputy Governor, Economic Policy, Central Bank of Nigeria, Dr. (Mrs.) Sarah Alade by the Director of Monetary Policy, Central Bank of Nigeria, Mr. Moses Tule. Other panel Discussants were experienced practitioners drawn from the Nigerian financial markets. It was genarally noted that the breakfast meeting was very apt and appropriate given the current state of the global and domestic economy. The global growth has stalled while the Nigerian economy has been expressing sluggish growth and has been in recession since the 1st quarter of 2016.

Building a strong Financial Institution: The Role of Monetary Authorities, Regulators and Policy makers

The keynote address alluded to the fact that the external environment is fraught with so many uncertainties; ranging from oil prices, foreign exchange, outcome of the US elections and the impact on the Asian economy, and the Nigerian situation is worsened by poor infrastructure, fallen price system, depreciation of the currency, low fiscal capacity, weak commodity prices, etc. which have left monetary authorities with very difficult choices in the tradeoff between tackling inflation, supporting growth and exchange rate stability.

The speaker was emphatic that there is a need to focus on building strong financial institutions that can withstand these shocks and uncertainties. Noting also, that the era of cut throat competition was over for good and the survival of the financial system and the economy rest on the collective effort of treasurers by ensuring increased financial intermediation.

The address also observed that the rising fiscal activities in the country has put pressure on the exchange rate. Therefore, while the CBN is working on tackling inflation, poor economic growth and foreign exchange, the Bank regardless needs to keep a keen eye on prices, stability and the quality of financial intermediation. A call was also made to corporate treasurers to promote the treasury function through transparency, professionalism, corporate governance and ethics.

Possible Economic Policy Outcome for 2017 & Implication for the Corporates

A focal discussion point at the breakfast meeting was on the impact and implication of policies on Corporates. Highlight of key economic policies that corporates are advised to watch out for in 2017 are listed below;

  • Corporates should be concerned about the liquidity of the institution which is fundamental to the treasury function
  • Given that Interest rates are high and the economy is tightening, focus should be on access to liquidity especially by medium size corporates
  • The need for corporates to be aggressive in terms of pricing (commissions, fees/cost of services, interest rate etc.)
  • The changing macroeconomic environment; as the ability to accurately forecast the likely changes will be one of the biggest challenges for Corporate Treasurers in 2017
  • More clarity to the process of pricing will also be key in 2017
  • Higher cost of borrowing

Speaking also on the impact of politics on policy, and the measures put in place to check the negative impact, it was observed that policy and politics both work in harmony. To this end, the following were advised;

  • The need to build democratic institutions
  • Strong political institutions need to be put in place as macroeconomic policies can only be effective when political institutions are strong
  • Government must provide a forward-looking policy framework that economic builders can key into
  • The need for stakeholders’ collaboration

Corporates and counterparty risk management

The panellist emphasised the need for government to accurately articulate the key economic issues. Adding that the economic cash flow issue needs to be addressed and the Government needs to encourage and boost production to tackle stagflation.

There was also a call to relieve the banks of the pressure of funding to enable corporates access funds from other sources, as this would promote competitive rates.

Considering counterparty risk, corporates are therefore advised to plan with the resources at their disposal, while ensuring their cash flow can support funding.

Alternative and non-conventional mode of funding available to corporates: The role of FMDQ

Corporate Treasurers were advised to always articulate their problems and think of solutions to them from the bankers’ and investment bankers’ perspectives.

FMDQ to publish private company bond rules in 2017. This is anticipated to open the debt capital market to private companies.

Foreign exchange disparity: issues and recommendations

A major problem identified for 2017 at the breakfast meeting, was the lack of confidence in the ability of the CBN to implement its policies.

Given the harsh impact of the foreign exchange disparity in the economy, measures that could be taken to reduce the disparity were identified to include; promoting liquidity in the capital market, focus on the productive sector and on producing quality finished products that are price competitive in the global market.

There was also a call to the government to consider restructuring the economic team to encompass a more diverse calibre of representatives in terms of skills and expertise as this would be a major foundation for addressing the current structural issues in the economy.




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