Uche Usim, Abuja
Central Bank of Nigeria Governor, Mr Godwin Emefiele on Monday said the management will work with relevant stakeholders to recapitalise commercial banks in the country to make them stronger to undertake greater tasks.
He made the disclosure while unveiling his second tenure, five-year agenda (2019-2023) in Abuja.
The last recapitalisation exercise was done in 2004 by the then CBN Governor, Chukwuma Soludo.
Emefiele said: “In the next five years, we intend to pursue a programme of recapitalizing the banking industry so as to position Nigerian banks among the top 500 in the world. Banks will, therefore, be required to maintain higher level of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system.
“Soludo did it last recapitalisation exercise in 2004 and increased the capital base of banks from N2 billion to 25 billion. It helped the banks and the economy become stronger. We could now take up large ticket transactions.
“But relate the value of N25 billion in 2004 when the exchange rate was about N100/dollar to now when the rate is N360/dollar. That is about $75 million. So, we need to recapitalise. It’s a policy trust and will be discussing at committee of governors meeting and modalities will be unveiled for everyone to see”, he explained.
He added that with the rise in digital payments and cyber security threats, the CBN will develop a robust mechanism that will help ensure that the necessary safeguards are put in place by banks and financial institutions to protect against loss of data, fraud and cyber incursions in their respective systems.
According to him, the apex bank in his second tenure, will work closely with fiscal authorities, to target a double digit growth and annual non-oil exports receipts from $2bn in 2018 to $12bn in the next five years.
“At the CBN, we commit to working assiduously to bringing down inflation to single digit; while accelerating the rate of employment.
“We intend to aggressively implement our N500bn facility aimed at supporting the growth of our non-oil exports, which will help to improve non-oil export earnings. We will launch a Trade Monitoring System (TRMS) in October 2019, which is an automated system that will reduce the length of time required to process export documents from one week to one day. This measure will help support our efforts at improving our non-oil exports of goods and services
“We will also work with our counterparts in the fiscal arm in supporting improved FDI flows to various sectors such as agriculture, manufacturing, insurance and infrastructure. We will introduce a non-oil export aspect to the anchor borrowers’ programme, which will be focused on linking smallholder farmers to international buyers.
“These measures while supporting improved inflows into the country, will help to stabilize our exchange rate and build our external reserves. Put succinctly, our priorities at the CBN over the next five 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.
“We shall also during this intervening period encourage our deposit money banks to direct more focus in supporting the education sector. “We want to grow our external reserves and support efforts at diversifying the economy through our intervention programs in the agriculture and manufacturing sectors.
“We are confident that when implemented, these measures will help to insulate our economy from potential shocks in the global economy”, he stated.
He added that part of the five-year agenda is to grow the current enrollment of 38 million unique banking customers to 100 million over the next five years.
“As regards the next five-year roadmap, we held consultations with some banks and business leaders in the private sector.
“We intend to sustain the pace of those consultations as this would act as a 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.
On the Presidential directive to boost productivity growth in agriculture through the provision of improved seedlings, as well as access to finance for rural farmers in 10 different commodities namely: rice, maize, cassava, cocoa, tomato, cotton, oil-palm, poultry, fish, and livestock/dairy, Emefiele said over 10 million jobs could be created over the next five years if efforts are made to expand cultivation and processing of the items in Nigeria.
“So far, we have held a series of engagements with importers and producers of these products. Most of them have committed that they would install or expand their production capacities in Nigeria. We believe these measures will help to boost not only our domestic outputs but also improve our annual non-oil exports receipts from $2bn in 2018 to $12bn by 2023.
On challenges, Emefiele acknowledged despite the giant strides recorded in various areas, the task of building a stronger economy was far from complete.
According to him, the pace of Gross Domestic Product (GDP) growth remains fragile and below the rate of our annual population growth at 2.7 percent.
“The recovery of our economy from the recession has not resulted in a significant reduction in our unemployment rate. We are yet to see a substantial increase in credit to the private sector by our financial institutions”, he noted.
The CBN Governor also frowned at the low performance of the power sector despite the huge funds pumped into it.
He however warned that the issue should be an excuse for not players in the economy not to work hard to grow the country.
“Our inability to address these challenges only served to reinforce our view that the CBN must continue to play an active role in supporting the growth of our economy, and redirect our emphasis on sectors that have the ability to support improved wealth and job creation for Nigerians such as the agricultural and manufacturing sectors.
“I am delighted to note that our external reserves have risen from $23bn in October 2016 to over $45billion by June 2019. Inflation has dropped from 18.72 percent in January 2017 to 11.40 percent in May 2019. Our CBN purchasing manufacturers index has risen for 26 consecutive months since March 2017, indicating continuous growth in the manufacturing sector, as a result of measures implemented by the CBN which has improved access to raw materials and finance for manufacturing firms.
“GDP growth has risen for seven consecutive quarters following the recession, and our exchange rate has appreciated from over N525/$1 in February 2017 at the BDC window to N360/$1. With improved inflow of foreign exchange, the exchange rate has remained stable at around N360/$1 for the past 27 months”.
According to the CBN Governor, beyond Nigeria’s domestic challenge of high unemployment and subdued growth, the economy is faced with three external events, which have the ability to affect the growth trajectory over the near to medium term.
“First, rising trade tensions between the United States and China, United States and Mexico and subdued growth in the Eurozone as well as other emerging economies such as China, India, South Africa, Brazil, Argentina and Turkey, are affecting the outlook for global growth in 2019 and 2020.The World Bank according to its latest report, projects that global growth will decline to 2.6 percent in 2019 from 3.0 percent in 2018, as a result of the above-mentioned factors.
“The second external challenge that may emerge from rising trade tensions and a potential slowdown in growth in advanced and emerging economies, is the impact it could have on capital flows to emerging markets. The risk of sudden stops and reversals of capital flows has increased as some investors weigh the benefits of investing in safe assets in advanced economies relative to assets in emerging markets.
“Third, we are also witnessing rising volatility in the crude oil market occasioned by the rapid increase in the supply of shale oil by the United States, which has seen its production rise from 9 million barrels in 2017 to over 12 million barrels today. The rise in US production continues to put downward pressure on crude oil prices, despite restrictions on crude oil output by OPEC members and sanctions by the US on the purchase of crude oil from Iran and Venezuela”, he revealed.
He said plans were afoot reinvigorate efforts at driving the cashless initiative across the country, due to the immense efficiency gains that will be derived from it, and the impact it could have on our financial inclusion drive.