Embrace import substitution to promote domestic industry, CIBN tells Nigerians

The Chartered Institute of Bankers of Nigeria (CIBN) has asked Nigerians to embrace import substitution to increase local production of goods. 

Bayo Olugbemi, CIBN president, made the call while delivering his remarks at the institute’s fellowship investiture ceremony themed, ‘Nigeria’s Rising Debt Profile: Issues and Implications for Sustainable Economic Development’ on Saturday in Lagos.

Import substitution is a trade and economic policy that advocates replacing imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.

He said that the choice of the topic stems from the growing concerns of Nigerians about the rising debt profile of the country and the need to educate the public on this issue and proffer sustainable management strategies.

He maintained that there is nothing wrong with borrowing.

According to him, public borrowing, public debt and public debt management are features of a modern economy.

He, however, said the major concern with borrowing be it, as an individual, organisation or a nation, is simply the purpose of the borrowing and the capacity to repay.

Olugbemi further said that high debt levels cannot be overlooked as historical accounts show that high debt ratios could negatively impact or worse still, reverse economic growth.

Citing a World Bank report, he said that a public debt-to-GDP ratio above 77 percent would result in an adverse impact on economic growth.

The CIBN president urged stakeholders in the banking and finance industry to continually support efforts and initiatives of government aimed at improving the economy toward inclusive growth and development.

He further advised the government to minimise borrowing.

“I would like to propose that we continually strive to rein in our rising debt profile. Just like the Latin Americans, let us embrace import substitution models that ultimately promote homegrown products and services, economic growth, and sustainable development,” he said.

“We must also pursue the path of efficiency, ensuring that all reoccurring costs that may potentially lead to excessive borrowing are reduced to the barest minimum.’’

In his remarks, Taiwo Oyedele, fiscal policy partner and Africa tax leader at PwC, said that Nigeria’s public debt over the past five years (2015-2020) had expanded by an average of 21.02 percent while the economic growth figure averaged 0.15 per cent.

Oyedele said that revenue, on the other hand, expanded by an average of 5.19 percent.

“By implication, the rate of expansion in public debt in Nigeria is fast outweighing the revenue mobilisation capacity of the government,” he said.

“Consequently, the debt to GDP ratio expanded from 20.32 percent in 2015 to 34.98 percent in 2020 (IMF).

“This pace of increase in the public debt stock, particularly, raised the fiscal sustainability concerns on Nigeria.”

Also speaking at the event, Ngozi Okonjo-Iweala, director-general of the World Trade Organisation (WTO), who is also one of the fellowship awardees at the event, commended the banking sector for its contribution to the development of the country and the continent as a whole.

“I’m honoured to be made a fellow of the prestigious the Chartered Institute of Bankers of Nigeria. I want to thank the institute for the excellent work it has done to uphold the professional and ethical standards of the Nigerian Banking Industry as well as its effort to educate new generations of bankers,” Okonjo-Iweala said.

“Nigeria’s banking sector has contributed immensely to the development of the country and indeed the continent; there is still so much to be done and our financial services industry, including the emerging fintech sector, has a strong role to play.”