AMID confusion and stagnation in economic activities trailing the removal of subsidy on premium motor spirit (PMS) also called petrol, Nigeria now ranks at the very bottom of the financial development index.



AMID confusion and stagnation in economic activities trailing the removal of subsidy on premium motor spirit (PMS) also called petrol, Nigeria now ranks at the very bottom of the financial development index.

Information from the World Economic Forum’s (WEF) recently released Financial Development Report 2011 and the Financial Development Index (‘the Index’), on which it is based, shows that Nigeria fell three spots from 57th position in 2010 to 60th in 2011.

The report acknowledges that although the number of positive developments is limited, Nigeria possesses a relative strength in terms of financial sector liberalisation on which the country ranks number 29. Conversely, the nation’s business environment, which ranks a dismal 58th, remains immensely underdeveloped.

Further disturbing information from the report is that the quality of Nigeria’s overall infrastructure which ranks 57th among the 60 nations is quite poor and the costs associated with starting a business and registering property in the country at the 60th position are extraordinarily high.

The report, in addition, asserts that ‘Nigeria lacks many of the foundational elements necessary for successful financial development. Moreover, financial intermediation is lacking across its banking financial services which ranks 56th, non-banking financial services, 58th, and financial markets that ranks 55th.

Overall financial access remains low at the 58th position, despite Nigeria’s advantages in foreign direct investment on which it ranks 20th and loan accounts at microfinance institutions, 21st.’

The Financial Development Report provides an important tool with which to centre a debate on both the effectiveness of proposed reforms and their possible long-term consequences at the country level.

The Report defines financial development as the factors, policies, and institutions that lead to effective financial intermediation and markets, as well as deep and broad access to capital and financial services. In accordance with this definition, measures of financial development are captured across the seven pillars of the Index.

Institutional environment encompasses financial sector liberalisation, corporate governance, legal and regulatory issues, and contract enforcement.
Business environment considers human capital, taxes, infrastructure, and costs of doing business.

Financial stability captures the risk of currency crises, systemic banking crises, and sovereign debt crises. Banking financial services measures size, efficiency, and financial disclosure.

Non-banking financial services include initial public offerings (IPO) and mergers and acquisitions activity, insurance, and securitisation. Financial markets contain foreign exchange and derivative markets, and equity and bond market development, while financial access evaluates commercial and retail access.

Analysts say this development leaves the country with only a slim chance of achieving the core objective of vision 20:2020, which is to rank among the top 20 economies of the world eight years from this year. It also calls for thorough benchmarking of the top 20 economies on the index.

This is more so with the mass protests that have shut down the entire economy, no thanks to growing rejection of the new subsidy removal regime. Though recognised among the world’s 60 leading financial systems and capital markets, the oil-rich nation is hobbled by growing but ominous insecurity, political instability, massive corruption, free reign of impunity, inadequate infrastructure, and weak macroeconomic management.

http://www.momentng.com/en/news/5950/nigeria-ranks-at-bottom-of-2011-financial-development-index.html