By Amechi Ogbonna
At the unveiling of the Central Bank of Nigeria latest real sector intervention initiative “The 100 for 100 PPP – Policy on Production and Productivity” (100-For-100), on October 31, 2021 in Abuja, by Governor Godwin Emefiele, one driving force behind it all was the government’s desire to retool the engine of production across the country.
The policy which many see as an adjunct to the June 23, 2015 ban on 41 import items by the CBN, aims at reviving the wheel of production in an economy laid prostrate by years of mindless importation of manufactured goods and services that can be replicated locally.
In simple daily parlance, the 100 for 100PPP is a financing scheme aimed at providing targeted funding (in Naira) under existing CBN’s intervention programmes to 100 high-impact companies and projects every 100 days.
Speaking at the launch of the Central Bank Digital Currency (CBDC), otherwise called the eNaira, at the Presidential Villa Abuja, the CBN boss, said the new scheme which would be driven by the CBN Development Finance Department under his direct supervision, would “advertise, screen, scrutinise and financially support 100 targeted private sector companies in 100 days, beginning from November 1, 2021, and rolled over every 100 days with new set of 100 companies, whose names will be published in National news media for Nigerians to verify and confirm.”
Consequently, eligible companies wishing to participate in the 100 for 100 policy initiative will access a maximum loan limit of N5 billion per obligor, the CBN said in the guidelines released for its implementation, stressing that interest rate under the intervention shall be at not more than 5.0 percent per annum, (all inclusive) up to February 28, 2022, after which interest on the facility shall revert to 9 percent p.a. (all inclusive) effective from March 1, 2022.
However, as a long-term loan for acquisition of plant and machinery and working capital, the 100 for 100 Policy on Production and Productivity (PPP) initiative shall be funded from the CBN’s Real Sector Support Facility – Differentiated Cash Reserve Requirement (RSSF-DCRR) window or any other funding window as may be determined by the apex bank.
It is a financial instrument designed to facilitate flow of finance and investments to enterprises with potential to catalyse sustainable economic growth, accelerate structural transformation, promote diversification, and improve productivity in critical sectors of the Nigerian economy amid soaring national spend on importation.
Under its current guidelines, only Cash Reserve Ratio (CRR) contributing Deposit Money Banks (DMBs) are eligible to participate in the initiative.
With unemployment data from the National Bureau of Statistics (NBS) showing a rate spike to 33.3 in March 2021 from 27.1 in December 2020, no one needs to be left in a dilemma as to the direct policy impact of energising hundreds of potential MSMEs beneficiaries with the much needed funding that enables them acquire machinery, raw materials, build capacity to activate local production rather importing goods from China the US and the European Union.
According to Dr Philip Yusuf Yila, CBN’s Director of Development Finance, the 100 for 100 PPP was introduced as a direct intervention measure to stimulate the flow of credit to the real sector of the economy in order to reverse the nation’s over-reliance on imports.
Indeed, the multiplier effect of this policy on GDP growth, job creation, taxes and revenue to government as well as capacity expansion in the various sectors of the economy can only be imagined.
That is why the various stakeholders who spoke to Daily Sun on the implications of the initiative for Nigeria’s economic growth and sustainability believe the CBN’s latest policy could really be the game changer in the country’s quest to build a vibrant and robust economy that is less dependent on oil and gas export.
Commenting on the intervention policy Chairman, SMEs Group, Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie, described it as a good policy “It’s a good initiative . If well implemented, it will help grow the economy and also reduce the level of poverty. The point is that we keep coming up with good policies but implementation is the problem. Now before the CBN comes up with any policy, it must also look at the things that will defeat the purpose of the initiative.
Transparency in the whole system is key. “ My fear is that the funds may end up in the wrong hands- who do not meet up the guidelines if not properly followed up. That is one of the worries.
According to Okezie, “Power issue should also be fixed. The challenges in the system should be fixed to enable any policy survive. Businesses coming on board face these realities on ground and so they must be dealth with to enable businesses thrive. Government needs to do much more to help businesses. Taxes are increasing, land use charge , local and state taxes all these pose hurdles to success of business in the community. We have so many new policies but what about the challenges on ground. The organised private sector (OPS) had made recommendations to the CBN on how it can help the sector’s members have access to the funds. There are existing funds that can grow businesses, create jobs and grow the economy. We’ve had sessions with the development finance department of the CBN and carried out advocacy on how these funds can be accessed. There are funds for agriculture , the real sector and other specific sectors of the economy. The question is are businesses accessing these funds?
Business owners ask if the present policy will work based on past and present experiences.
I advice that there has to be transparency in the system. The funds should be disbursed through the OPS, by involving the associations to bring out their members who are qualified. The CBN should screen the qualified members and then disburse these funds to them in alliance with the OPS.
By this, we are sure the funds are reaching the target group who really need them. We need some high level of transparency to be sure the purpose is achieved,” he said
Also commenting on the policy designed to boost local production and create more jobs, Frank Onyebu, Chairman, Manufacturers Association of Nigeria (MAN), Apapa branch described the 100 for 100 policy as another good initiative of CBN which if well implemented could be a game changer in the nation’s quest to kickstart the near comatose economy.
“However, one must point out that the CBN has come out with lots of great initiatives in the past. The problem is always with the implementation. So what I’d like to see is for the implementation to be as good as the policy itself.
The benefits that can accrue from this initiative are enormous. The ripple effects are unquantifiable if properly implemented. CBN has the capacity to drive this initiative. The question is, does CBN have the political will to push it through to a logical conclusion.
Selection of beneficiaries should be devoid of corruption. My advice is for CBN to engage the services of a world-class consultant to drive the process. The consultant should be allowed to work with no interference whatsoever to ensure that only firms with the resources to bring about the desired impact are selected,” he argued.
For his part, Dr Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE) and an economist, said the initiative remains a good one as the CBN deserves to be commended for its unwavering commitment to industrialisation and backward integration. “ He said “There is really no material difference between this initiative and the ones before it, except for the exciting acronym of 100 for 100.
But the facility is likely to end up with the medium to large corporates. The small businesses will have to struggle to meet the conditions. This is moreso when deposit money banks are the ones to process the applications. The condition that the banks will bear the credit risk will make access even more difficult. The banks are generally not often excited about these programmes because of the potential exposure to sectors perceived as very risky. The collateral preference of most banks is bank guarantee. Many SMEs do not have access to these guarantees. Flexibility in the use of the funds would be beneficial to many businesses. Many industrialists are struggling with working capital, others are grappling with the burden of debt service. “
But on the whole, Yusuf said it is a laudable initiative by the CBN as It would impact positively on investors who benefit from the facility.
In his reaction, Managing Director, APT Securities, Kurfi Garba, said “I would say the broad objective of this new CBN’s 100 for 100 PPP financial instruments is to reverse the nation’s over-reliance on imports, by creating a platform that targets and supports the right companies and projects with potential to immediately transform and jumpstart the productive base of the economy.”
“If I were to give my stance, I will say that under the initiative, projects that must catalyse sustainable employment-led economic growth through increased domestic production and productivity in the near term or long term should be strongly considered.
According to the CBN, the projects for consideration shall be new projects in existing companies requiring new machinery and other support and must have the greatest potential to achieve significant scale in their in-country production and for domestic consumption and exports.
Furthermore, the guideline from CBN stated that the focal activities covered under the initiative shall be existing businesses and projects (brownfield) with potential to immediately transform and catalyse the productive base of the economy. New projects (greenfield) with equal potential may be considered under the initiative, subject to CBN management’s approval.
But Analysts at Afrinvest had argued that the headwinds confronting businesses in the country extend beyond funding.
“We opine that the harsh business environment induced by policy inconsistencies, high insecurity, poor infrastructure, multiple taxation, and overregulation, threaten the prospect of any meaningful take -off in terms of productivity in the short-to-medium term. We, therefore, recommend that the fiscal authority complement the efforts by the CBN in addressing the inherent risks affecting businesses.