The Association of Corporate Treasurers of Nigeria (ACTN) has urged the Federal Government to revise its economic reforms to address the pressing liquidity issues faced by businesses. This call for action was made during an ACTN Members’ Networking and Breakfast meeting, which aimed to equip treasurers with practical strategies to navigate the current economic landscape and sustain their businesses amidst challenging circumstances. Industry leaders gathered to discuss the implications of tight monetary policies and rising operational costs, emphasizing the need for timely interventions that can support businesses struggling under the weight of the reforms.
Dr. Muda Yusuf, the Director of the Centre for Promotion of Private Enterprise (CPPE), outlined the severe challenges posed by recent economic reforms, particularly over the past 18 months. He pointed out that treasury management has turned into an arduous task due to factors such as increasing interest rates and liquidity constraints aimed at curbing inflation. Yusuf expressed concern that the current economic climate has placed immense pressure on companies, noting that “we are seeing quite several casualties resulting from the current economic reforms.” He asserted that the stringent monetary policies, particularly the Central Bank of Nigeria’s (CBN) contractionary measures, have exacerbated existing challenges, including a high cash reserve ratio and rising borrowing costs.
Yusuf’s analysis highlighted a shift in monetary policy under the new CBN leadership, which has moved from the unorthodox approaches of former Governor Godwin Emefiele to a more traditional stance under Yemi Cardoso. He emphasized that the recent orthodox policies, which prioritize market-driven interest rates and the floating naira, have led businesses into a precarious position due to currency volatility and skyrocketing inflation. Many multinational firms have exited the market, unable to handle the risks associated with these changes. Yusuf urged policymakers to consider Nigeria’s unique economic conditions, suggesting that an inflexible application of global economic management models without adaptation to local realities could exacerbate the situation.
In terms of mitigating these adverse effects, Yusuf advised treasurers to implement robust risk management strategies that cater to emerging risks in the current economic environment. He encouraged exploration of alternative financing models, such as development finance, to alleviate liquidity pressure on their businesses. By strategically managing treasury operations, companies can maintain solvency and optimize their financial resources effectively. This recommendation came in the wake of increased operational costs driven by inflation and foreign exchange instability, necessitating a reevaluation of liquidity management practices across corporate treasuries.
Adding to the conversation, Dr. Austin Okpagu, the Country Director at Verto Financials Ltd, presented practical technology solutions designed to help businesses mitigate currency volatility and streamline international payment processes. Okpagu showcased how platforms like Verto allow treasurers to manage multiple currencies without converting naira to hard currencies like dollars. He explained that businesses can harness these fintech solutions to lock in favorable exchange rates and reduce risks related to currency fluctuations. Furthermore, Okpagu highlighted the distinct advantages of embracing technology, which can significantly enhance working capital and streamline complex liquidity management issues that treasurers face today.
Benedict Ologbosera, a member of the ACTN governing council, reinforced the need for corporate treasurers to reevaluate their liquidity strategies amidst the dual pressures of inflation and foreign exchange volatility. He asserted that the increased cost of doing business necessitates not only optimizing funding sources but also ensuring that these resources are utilized efficiently. Ologbosera emphasized the importance of strategic decision-making about fund allocation, suggesting that treasurers must prioritize their financial strategies to maximize returns and align with critical business objectives. Overall, the discussion among treasurers highlighted the urgent need for innovative solutions and a collaborative approach to navigating the complex economic landscape in Nigeria.
In summary, the recent discussions among the ACTN members have underscored the critical nature of treasury management amid the evolving economic situation in Nigeria. The insights shared by industry leaders reflect the urgent need for adaptive strategies that account for unique local challenges, particularly in the face of stringent monetary policies and high inflation. The call to rethink economic reforms by the ACTN, coupled with the advocacy for fintech solutions, presents a comprehensive avenue for enhancing financial management practices in businesses, ultimately steering them towards sustained growth.
