Emefiele: Seven years of revamping economy, banking sectors
KAYODE TOKEDE writes on the Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele’s seven years (June 5, 2014) in office that has witnessed economy and banking sector restoration.
When the governor of CBN first resumed office in 2014, his major concern was to entrench macroeconomic stability and engender economic development.
Through this, he has aggressively targeted development finance function by intervening in agriculture, power, aviation, manufacturing among other sectors of the economy.
He has promoted price and monetary stability, exchange rate stability, financial system stability as well as spur growth through development finance interventions.
He realized that the CBN intervention in some of these sectors aims to assist the government in jobs creation, reduce the country dependence on importation, make the country goods competitive across Africa and most importantly, grow the country’s economy.
In his inaugural speech titled, “Entrenching Macroeconomic Stability and a Engendering Economic Development in Nigeria,” when he was first appointed in 2014, as well as his five-year policy thrust when he was reappointed for another term of five years (2019-2024), the CBN Governor, stressed on the need to embrace nterventionist model that has witnessed remarkable achievement across key sectors.
In his second year in office inaugural speech, he said “You will recall that during my maiden address on June 5, 2014, I stated that my vision would be to ensure that the CBN is more people focused, as its policies and programs would be geared towards supporting job creation, reducing the high level of Treasury-Bill rates, improving access to credit for MSMEs, deepening our intervention program in the Agricultural Sector, building a robust payment system infrastructure that will help drive inclusion, in addition to key macroeconomic concerns such as exchange rate stability, financial system stability and maintaining a strong external reserve.”
He has in the last seven years tightened of the monetary policy rate in order to rein in inflation, created an Investors and Exporters Window which allowed exporters and investors to inflow and sell their foreign exchange at the prevailing market rate.
In order to reduce reliance on the importation of items which could be produced in Nigeria, the CBN in the last seven years has maintained pressure in the restriction of access to foreign exchange on items that can be produced locally, while deploying intervention funds to support growth and productivity in the agricultural and manufacturing sectors.
“These measures helped to support the attainment of our monetary policy objectives such as a reduction in the inflation rate, stability in our exchange rate and improved accretion to our external reserves,” he had said.
Saddle with economy growth comes with numerous domestic and foreign challenges, given Nigeria’s mono economy.
The normalization of monetary policy in the United States and drastically drop in global oil prices had significant adverse consequences on economy and forced the CBN governor and his team to adjust methods.
Given Nigeria’s dependence on crude oil revenues for close to 86 per cent of foreign exchange earnings and over 60 per cent of government expenditure, the drop-in prices led to heighten inflationary pressures, depreciation of exchange rate, significant drop in external reserves, and eventually, a recession set in Second Quarter of 2016.
Also, the closure of international and local businesses due to COVID-19 pandemic dragged the nation’s economy into recession in third quarter of 2020, as Real Gross Domestic Product (GDP) contracts by -3.62per cent.
The pandemic surfaced eight months after he was reappointed for a second term; the disruption was occasioned by the COVID-19 which came into the country in 2020.
The pandemic led to a significant drop in the price of crude oil and once more exposed the economy’s weak underbelly. Crude oil represents about 95 per cent of Nigeria’s export revenue and a downturn in the market for the commodity always has a ripple effect on the economy.
The pandemic which started as a health crisis transformed to an economic crisis and necessitated response from fiscal and monetary policy authorities across the globe, including in Nigeria.
In Nigeria, in line with the first-responder approach, the Emefiele-led central bank acted swiftly, almost when the first case broke out in the country by unveiling a raft of measures to moderate the impact of the virus on households, businesses as well as the economy.
Specifically, Emefiele announced an extension of the moratorium on the apex bank’s interventions programmes, interest rate reduction, creation of a N100 billion targeted credit facility; N100 billion health sector intervention facility and N1 trillion for the manufacturing sector. Some other measures included strengthening the central bank’s Loan to Deposit Ratio (LDR) policy and regulatory forbearance.
Also, as part of efforts to stimulate infrastructural development across the country, the CBN, working with the fiscal authorities also established a N15 trillion infrastructure development company (Infraco).
He was also instrumental to the formation of the private-sector-led Coalition Against COVID-19 (CACOVID), which was able to mobilise billions of naira and has immensely supported the country’s COVID-19 fight by setting up healthcare facilities across the country as well as in distributing palliatives to states.
The health sector facility provided loans to pharmaceutical companies to expand/open their drug manufacturing plants in the country and also for hospitals and healthcare practitioners to expand/build health facilities.
As part of efforts to stimulate infrastructural development across the country, the CBN, working with the fiscal authorities also established a N15 trillion infrastructure development company (Infraco).
In all, the CBN recently disclosed that 585,593 beneficiaries have received N462.722 billion as at May 28, 2021, from its various intervention schemes.
A breakdown of this showed that from January 2021 to date, N157.517 billion have been disbursed for 29 real sector projects under the Real Sector Support Facility- Differentiated Cash Reserve Requirement (RSSF-DCRR).
Also, from January 2021 to date, N26.008 billion has been disbursed for 10 projects under the COVID-19 manufacturing intervention schemes, while N255.992 billion have been disbursed for 78 projects under the CMIS from January 2020 till May 28, 2021. A total of 91 healthcare projects have also been funded to the tune of N97 billion under the Healthcare Sector Intervention Facility (HSIF) as at May 28, 2021; just as the sum of N111,706,807,536.11 have been disbursed by the CBN under Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) to 29,023 beneficiaries as at May 28, 2021. In the same vein, in line with its desire to stimulate output growth, the sum of N3, 198, 911, 438.20 have also been disbursed under the Creative Industry Financing Initiative (CIFI) to 341 beneficiaries as at May 28, 2021, while the sum of N253, 447,787,865 have been also been so far been disbursed under the targeted credit facility to 548, 345 beneficiaries as at May 28, 2021. The central bank recently announced that the Monetary Policy Committee has approved the raising of the targeted credit facility from the N300 billion it was increased to in March this year, to N400 billion.
Also in line with its drive for youth empowerment, the sum of N3, 004, 5555,000 have been disbursed under the Nigerian Youth Investment Fund (NYIF) to 7,057 beneficiaries as at May 28, 2021, while the sum of N85, 190, 160, 367.80 have been disbursed under Micro Small and Medium Enterprises Development Fund (MSMEDF) to 746 beneficiaries as at May 28, 2021 and the sum of N6 billion have been disbursed under SANEF to 14 beneficiaries as at May 28, 2021.
The sum of N173, 419,822.07 have been disbursed under the Youth Enterprise Development Fund (YEDF) to 67 beneficiaries as at May 28, 2021. YEDP disbursement by geo-political zone showed that for the South-west, 39 beneficiaries got N98, 570,852.07; North-central, 11 beneficiaries got N28, 805, 740; and for the South-east, eight beneficiaries received N22, 050,000. In addition, for the South-south, six beneficiaries received N16, 023,230; the North-west had two beneficiaries which received N4, 970,000 and the North-east had one beneficiary which got N3,000,000 A breakdown of the N100 billion healthcare facility also showed that applications have so far been received for 222 projects valued at N177.424 billion. Out of the 222 projects, 91 projects, that is 41 per cent of total HSIF valued at N97.444 billion have been approved and disbursed as at May 28, 2021.
Under the N1 trillion real sector fund, a total of 234 real sector projects valued at N857,644,988,332.70 was approved and disbursed from November 2018 till May 28. Of the total 234 project, 155 real sector projects valued at N614, 612, 616, 904.95 was financed from January 2020 till May 28, 2021 to: 78 manufacturing projects – N255, 991, 800, 593.50; 36 agricultural projects – N84, 481, 444, 941.05; 30 Service projects – N190, 639, 371, 370. 40; and 11 Mining Projects – N83, 500, 000, 000.
As of early 2021, the CBN had disbursed N554.61 billion to 2,849,490 farmers to boost food security under its Anchor Borrowers’ Programme since 2015. Also, more than N300 billion had been disbursed to companies operating in the southern part of Nigeria, just as he appealed to farmers to pay their loans in order to sustain the programme.
To Emefiele, the disruptions caused by the pandemic was an opportunity to re-echo a persistent message the CBN has been sending for a long time, on the need to reset the economy and to birth “a new Nigeria.”
According to him, for a country of over 200 million people, projected to be almost 450 million in a few decades, “we can no longer ignore repeated warnings about the dangers that lie ahead if we do not begin to depend largely on what we produce locally because the security and well-being of our nation is contingent on building a well-diversified and inclusive economy.”
This, he said informed the central bank’s aggressive development finance interventions.
“The CBN has indeed created several lending programmes and provided hundreds of billions to smallholder farmers and industrial processors in several key agricultural produce. These policies are aimed at positioning Nigeria to become a self-sufficient food producer, creating millions of jobs, supplying key markets across the country and dampening the effects of exchange rate movements on local prices,” he explained.
This philosophy, according to Emefiele, has been the consistent theme of the CBN’s policies over the last couple of years, just as he cited the restriction of access to foreign exchange from some items at its window.
He said the measures were deliberately designed to both support the federal government’s immediate fight against COVID-19 and also build a more resilient, more self-reliant Nigerian economy.
Therefore, he stressed the need for Nigerians to continue to support the federal government in its quest to deliver high-quality infrastructure, support large-scale production of staple and cash crops in the country and develop the educational sector, among others.
Nevertheless, the Emefiele-led CBN would have to redouble its efforts in the area of price stability as well as do more to boost forex flows in order to guarantee exchange rate stability and boost the external reserves which presently is at $34 billion.
This is because with inflation at 18.2 per cent as of May 2021, it leads to income redistribution and brings about weak purchasing power. Likewise, rising prices neutralise the money that one earns from investments. That is, inflation is effectively the reverse of compound interest.
That is why CBN needs to continue to take steps to see that inflation returns to single-digit. In addition, the monetary authorities must continue to work with relevant fiscal authorities to lower the rate unemployment in the country presently put at 33.3 per cent.
He has worked with financial institution at reducing the sector’s Non-Performing Loan (NPL), grow assets, strengthen Liquidity Ratio, Capital Adequacy Ratio (CAR) and improve on bank’s customer ease of transactions across the country.
Speaking on his vision for the next five years, the CBN Governor said, “We intend to sustain the pace of those consultations as this would act as barometer for measuring the progress being made in the implementation of our policies.
“Our assessment of the outcome of that deliberation shows that with concerted efforts, the challenges facing the country are easily surmountable.
“Consequently, working closely with our fiscal authorities, we pledge to target a double digit growth by the next five years and at the CBN, we commit to working assiduously to bringing down inflation to single digit; while accelerating the rate of employment.
“Put succinctly, our priorities at the CBN over the next 5 years are the following; First, preserve domestic macroeconomic and financial stability; Second, foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country; Third, continue to work with the Deposit Money Banks to improve access to credit for not only small holder farmers and MSMEs but also Consumer credit and mortgage facilities for bank customers.
“Our intervention support shall also be extended to our youth population who possess entrepreneurship skills in the creative industry.
“This group deserves our encouragement. We shall also during this intervening period encourage our Deposit Money Banks to direct more focus in supporting the Education Sector. Fourth, grow our external reserves; and fifth, support efforts at diversifying the economy through our intervention programs in the agriculture and manufacturing sectors.”
