Deviation from core mandate in previous years responsible for CBN inefficiency — Cardoso

…Says CBN repositioning to be a catalyst for economic stability, growth

…Apex Bank rules out direct, quasi-fiscal interventions in other sectors of the economy

…On MPC meetings: We have fulfilled statutory obligations, our focus is on effectiveness, he says

The Governor of the Central Bank of Nigeria, Mr Olayemi Cardoso has attributed the ineffectiveness of the apex bank and its policies to the shift in focus from the bank’s core mandate to other areas outside of the mandate of the bank.

The CBN Governor made this known at the Chartered Institute of Bankers of Nigeria (CIBN) annual dinner in Lagos on Friday.

The Governor in his first policy speech reeled out the Apex’s bank economic outlook for 2024 and its plan to stabilize the nation’s economy.

Speaking on the profile of the CBN amongst Nigerians, Cardoso said, “I am aware that events over the past few years have also put the CBN in a bad light. These issues can be attributed to various factors, such as corporate governance failures, diminished institutional autonomy of the Central Bank of Nigeria, a deviation from the core mandate of the Bank, unorthodox use of monetary tools, an inefficient and opaque foreign exchange market that hindered clear access, a foray into fiscal activities under the cover of development finance activities. There was also a lack of clarity in the relationship between fiscal and monetary policies, among other challenges.”

He noted that, “Hitherto, the CBN had strayed from its core mandates and was engaged in quasi-fiscal activities that pumped over N10 trillion in the economy through almost different initiatives in sectors ranging from agriculture, aviation, power, youth and many others. These clearly distracted the Bank from achieving its own objectives and took it into areas where it clearly had limited expertise.

“Ladies and gentlemen, under my leadership, the Central Bank of Nigeria will vigorously address these issues. We will tackle institutional deficiencies, restore corporate governance, strengthen regulations, and implement prudent policies. 

“We assure investors and the business community that the economy will experience significant stability in the short-to-medium term as we recalibrate our policy toolkits and implement far-reaching measures,” he said.

The CBN Governor highlighted that the primary mandate of the CBN is to ensure price stability, in addition to other objectives such as issuing legal tender currency, safeguarding external reserves, promoting a sound financial system, and providing economic and financial advice to the government.

The Governor therefore announced a discontinuation of direct quasi-fiscal interventionist activities.

For the Central Bank, quasi-fiscal activities typically involve taking actions that affect public finances such as targeted lending and participating in activities beyond its traditional monetary policy mandate.

During Godwin’s Emefiele time as the CBN governor, the apex bank developed a reputation for carrying out these activities, especially around the agriculture sector.

Some of the quasi-fiscal activities carried out by the CBN under Emefiele include the Anchor Borrowers Programme, which was a lending programme targeted at farmers.

In 2022 alone, the CBN gave out about N629 billion to farmers under the Anchor Borrowers Programme.

However, reports emerged that loan defaults were threatening the success of the program.  

Another noteworthy quasi-fiscal activity undertaken by the CBN was a N1 trillion loan facility for manufacturers instituted by the CBN in April 2020.

The Governor added that the apex bank will focus on repositioning as a catalyst for economic stability and growth.

“As an adviser to the government, the CBN will be repositioned as a catalyst for economic stability and growth.

“Instead of direct interventions, we will collaborate with stakeholders and formulate policies that create an enabling environment for sustained economic growth and development. 

“Our catalytic role will support increased investment and private sector participation in the economy, improve access to finance for MSMEs, and enhance financial services for the underbanked.

“This includes promoting specialised institutions and financial products to support emerging sectors, developing regulatory frameworks to unlock dormant capital in land and property holdings, facilitating accelerated access to consumer credit, and expanding financial inclusion to reach the masses.

“Furthermore, we will work with experts to develop de-risking instruments that encourage private sector investment in key industry verticals such as housing, textiles and clothing, food supply chain, healthcare, and educational supplies, which have high potential for local inputs and value retention.

“The CBN will leverage its convening power to engage multilateral and international stakeholders in government and private sector initiatives,” Cardoso explained.

…AFAN commends Cardoso on discontinuance of direct interventions by CBN

Speaking to Nigerian NewsDirect, the National President of the All Farmers Association of Nigeria (AFAN), Arch Kabir Ibrahim commended the CBN Governor for his decision to discontinue direct interventions by the Apex bank.

Specifically on the Anchor Borrowers Programme, Ibrahim stated that the initiative was ineffective and was only beneficial to the cronies of the former CBN Governor.

According to him, the farmers had cried out under the former CBN Governor that they were not benefitting from the programme.

He noted that with the decision of the new CBN Governor to put a halt to it, the farmers welcome the decision.

Ibrahim also commended President Bola Ahmed Tinubu for taking swift action to address the concerns of farmers.

According to him, “Former President Muhammdu Buhari before he left office assented to the National Agricultural Development Fund specifically dedicated to interventions in the Agricultural Sector. When this new administration came on board, the President swiftly appointed an executive Secretary. This shows the commitment of President Tinubu to address food inflation and food insecurity.”

…MPC meetings: We have fulfilled statutory obligations, our focus is on its effectiveness

Addressing concerns on the failure of the apex bank to conduct Monetary Policy meetings since he assumed office, Cardoso said, “the Central Bank of Nigeria Act 2007 requires that the meeting of the Monetary Policy Committee of the Bank be held at least four times a year, and the Bank has satisfied this requirement for 2023.”

“Our focus has been on ensuring these meetings are useful and effective.”

Speaking further, the Governor narrated that, “In recent discussions with individuals from different walks of life, I encountered a young family trying to make ends meet in the face of rising prices. They shared their worries about the erosion of their purchasing power and the challenges of meeting basic needs within a tight budget. They emphasized the importance of stable prices to protect the well-being of ordinary citizens and ensure a fair distribution of resources. It is crucial that we prioritize price stability to safeguard the livelihoods of our fellow Nigerians.”

“Stabilizing the exchange rate is another critical aspect of our efforts to promote economic stability.

“To address these challenges, the Central Bank of Nigeria is committed to achieving monetary and price stability. This is not just a technical objective, but it has real-life implications for the well- being of our citizens.

“Through targeted policies, transparent market operations, and coordination between monetary and fiscal authorities, we can ensure a more stable exchange rate, control inflation, and create an enabling environment for businesses and individuals to thrive.

“This is what I, together with my team at the Central Bank have been focused on doing in the past two months. We have critically reviewed the effectiveness of the Central Bank’s monetary policy tools and have spent time fixing the transmission mechanism to ensure the decisions of MPC meetings actually result in desired objectives. For quite some time, there has been a dislocation of our monetary transmission mechanisms rendering the MPC meetings largely ineffective.

“I am happy to report that our efforts over the past two months have begun to yield fruit.

“Regular Open Market Operations (OMO) to mop up excess liquidity from the banking system. An OMO auction was recently held with a stop rate of 17.5 percent for the one-year tenor, attracting oversubscription of N350 billion. Another round of OMO has been approved to further reduce excess liquidity,” the Governor stated.