From Uche Usim, Abuja
The import-dependent nature of the Nigerian economy has become its greatest challenge. This defective economic structure exacerbated by a plethora of severe headwinds like huge sovereign debt, low export, blooming insecurity, high food prices, depreciating naira, COVID-19 pandemic and reduced foreign investments has put severe strain on the Central Bank of Nigeria (CBN), being the head of the monetary policy wing.
The reality is that while the distressed economy is not the making of the CBN happy, the apex bank has unveiled several intervention programmes since Mr. Godwin Emefiele took the reins of CBN in 2014. Emefiele assumed duties when global oil prices were slowly receding, triggering alarm bells of a possible recession, which occurred in 2016 and exited in a shaky fashion in 2017.
Prior to the recession, Emefiele had on several occasions warned of the dangers of relying solely on crude oil receipts, with its inherent volatility, as Nigeria’s only breather, rather than diversifying the economy and boosting exports to earn foreign exchange.
He listed agriculture, mining, manufacturing, science and technology, ICT and other sectors as robust development enablers that could turn around the fortunes of Nigeria, while helping it reduce its debt burden.
The CBN governor has urged all restive youths to drop their arms and embrace the ABP, as it is capable of solving the food insufficiency and unemployment nightmares, which are two main factors fuelling insecurity.
With a fiscal wing constantly finding comfort in rising crude oil receipts, Emefiele constantly nudged it to reality by relentlessly singing the diversification tunes anchored on a broad implementation template.
The Bank under its Anchor Borrowers Programme (ABP) has cumulatively released the sum of N798.09 billion to 3.9 million smallholder farmers cultivating 4.9 million hectares of land across the country. Out of this for the 2021 wet season farming, the Bank released the sum of 161.18 billion to 770,000 small-holder farmers cultivating seven commodities on 1.10 million hectares across the country. While harvesting for the 2020 dry season under the programme is rounding up, harvesting activities have commenced for the 2021 wet season cultivation. The Strategic Maize Reserve Programme of the CBN has been useful in moderating maize prices by directly targeting large feed mill producers. Under its Commercial Agriculture Credit Scheme (CACS), the CBN has supported 657 large-scale agricultural projects, to the tune of N708.39 billion.
To support Micro Small and Medium Enterprises (MSMEs) across the country, the Bank disbursed N134.57 billion to 38,140 beneficiaries under the Agribusiness/Small and Medium Enterprise Investment Scheme (AGSMEIS), and for the Targeted Credit Facility (TCF), the sum of N343.21 billion has been released to 726,198 beneficiaries, comprising 602,730 households and 123,468 Small and Medium Enterprises.
Some of the commodities captured under ABP are cassava, cotton, fish, groundnut, maize, poultry, rice, soya beans, wheat, cattle, sorghum, ginger, castor seed, sesame, tomato, cocoa, yellow pepper, oil palm, cowpea and onion. All intervention loans attract only 5% interest and some moratorium.
Under the Real Sector Facility, the bank released N1.00 trillion to 269 real sector projects, of which 140 are in light manufacturing, 71 in agro-based industry, 47 in services and 11 in mining. Under the Healthcare Sector Intervention Facility (HSIF), N103.02 billion has been disbursed for 110 healthcare projects, of which 27 are pharmaceutical, 77 hospitals and 6 other healthcare service projects. The Bank has also disbursed a total of N145.99 billion under its Non-Oil Export Stimulation Facility (NESF). The CBN has revised the guidelines, working with Nigerian Export-Import Bank to improve access to the intervention and stimulate non-oil export growth in Nigeria.
Under the National Mass Metering Programme (NMMP), N41.06 billion has been disbursed to ten (10) DisCos, for the procurement and installation of 759,748 electricity meters. Under the Nigerian Electricity Market Stabilization Facility – 2 (NEMSF-2), the Bank has released the sum of N145.66 billion to 11 DisCos as loans to provide liquidity support and stimulate critical infrastructure investment to improve service delivery and collection efficiency.
In furtherance of its intervention in the energy sector, the Bank has disbursed N39.20 billion to six (6) beneficiaries to improve gas-based infrastructure to support the Federal Government’s Auto-Gas Conversion Programme. The Bank has also encouraged Deposit Money Banks (DMBs) to participate in the Solar Connection Facility (SCF) to improve energy access in the rural areas.
To promote entrepreneurship development among Nigerian youth, the Bank recently approved the implementation of the Tertiary Institutions Entrepreneurship Scheme (TIES). The Scheme is designed to promote entrepreneurial activities and foster job creation among Nigerian youths.
The Committee applauded the continued moderation in headline inflation for the fifth consecutive month to 17.01 per cent (year-on-year) in August 2021 from 17.38 per cent in July 2021. The continued decrease was attributed to a marginal decline in the food component to 20.30 per cent in August 2021 from 21.03 per cent in July 2021. The core component, also, declined to 13.41 per cent in August 2021 from 13.72 per cent in July 2021. The MPC noted that headline inflation remained well above the Bank’s benchmark corridor of 6 – 9 per cent, but expressed optimism that with sustained interventions by the Bank, food production will continue to improve, thus moderating headline inflation further. The committee, thus, urged the fiscal authority to build on earlier efforts to articulate a clear strategy to attract private sector investment while resuscitating critical infrastructure to improve the ease of doing business in the country.
Members observed that broad money supply (M3) rose to 5.83 per cent in August 2021, compared with 2.91 per cent in July 2021. This was largely driven by the growth of Net Foreign Assets and Net Domestic Assets by 12.35 and 4.30 per cent in August 2021, compared with 1.84 and 3.17 per cent in July 2021, respectively. The growth in Net Foreign Assets was largely driven by increase in foreign asset holdings of commercial and merchant banks. The increase in Net Domestic Assets reflects the boost to aggregate credit net, which increased to 8.14 per cent in August 2021, from 5.71 per cent in July 2021.
In the money market, the monthly weighted average Inter-Bank Call and Open Buyback (OBB) rates increased to 13.45 and 12.97 per cent in August 2021 from 10.72 and 11.60 per cent in July 2021, respectively. This increase reflected the tight liquidity conditions in the banking system during the review period as the Bank curtailed excess system liquidity.
At the recent 138th Monetary Policy Committee (MPC) meeting of the CBN, members noted the moderate improvement in the equities market in the review period, as the All-Share Index (ASI) increased by 2.67 per cent from 37,907.28 on June 30, 2021, to 38,920.50 on September 14, 2021. Market Capitalization (MC) also increased by 2.63 per cent from N19.76 trillion to N20.28 trillion over the same period, reflecting improvement in investor confidence following the strengthening of output growth.
The committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019. Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.
The committee noted the significant increase in the external reserves which rose to US$35.97 billion at end-August 2021 from US$33.49 billion at end-July 2021, representing an increase of 7.41per cent. It also welcomed the further increase to US$36.03 billion on September 13, 2021.
Experts note that it is against this backdrop that the CBN’s recent action against BDCs should be understood as it is vital to inject sanity and improve transparency in the forex market and ultimately safeguard the foreign reserves.
Some analysts also hailed the crackdown on abokiFX as a way of warding off destructive speculation and forex market manipulation which hurts the economy.
Interestingly, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed and the CBN governor have, at different fora, assured Nigerians of dedicated efforts to strengthen the economy as it recovers from the wounds of two recessions within four years.
On the fiscal wing, the minister noted that the government has since developed an economic sustainability plan to cushion the effect of COVID-19 pandemic.
“Government will activate the economy by undertaking growth-enhancing and job-creating infrastructure investments in roads, rails, bridges, solar powers as well as communication technologies.
“Promoting, manufacturing and local production at all levels and advocating the use of made in Nigeria goods and services as well as creating job opportunities
“Achieving self-sufficiency in critical sectors of our economy and curbing unnecessary demand for foreign exchange which put pressure on the exchange rate.
“Extending protection to the very poor and vulnerable including women, persons living with disabilities through proper spending” she stated.
Economic watchers have hailed the apex bank for readily injecting a cocktail of conventional and unconventional economic stimulation strategies to get things back on track like it did in 2016 and 2020 recession seasons.
They insist that the apex bank seems to be the only government establishment, from the monetary policy wing, willing and ready to face the economic challenges headlong.
The Vice President and Head of the National Economic Council, Prof. Yemi Osinbajo, at a recent forum emphasized that the government was committed to working in synergy with the private sector to foster equitable growth and boost national development.
According to Professor Uche Uwaleke, Nigeria’s first professor of the capital market, the overall objective of these interventions is to promote financial inclusion in the country, tackle unemployment, insecurity and other social challenges.
A 2019 effort by the CBN to revive the Cotton, Textile and Garment (CTG) industry has led to the creation of 620,000 direct and indirect jobs in the last two years, while over 278,500 hectares of cotton farm was financed by the apex bank in 2019 and 2020, with over 90,000 MT of cotton seed harvested. Over N44 billion was disbursed between 2019 and 2020 across the CTG value chain to up the ante in the sector.
Moreover, any textile company with an existing facility in the books of Bank Of Industry (BOI) under the Cotton Textile and Garment (CTG) scheme is eligible to apply. Again, textile companies with existing facilities in DMBs/NIFIs can apply. Textile companies that are not participating under the SME/RRF can also apply.
Beneficiaries of the facility, Who spoke with Daily Sun hailed the apex bank for its numerous interventions. Wakili Sarah, an entrepreneur, told Daily Sun that she was a beneficiary of the CBN household loan under the Targeted Credit Facility (TCF) meant to cushion the effect of the COVID-19 pandemic.
“I saw the news in the media and I applied online. I was called for an interview and eventually, I was given. I got N350,000. It was indeed a dream come true because I’ve started a small makeup business
“I’m likely to pay back this loan in 12 months. I’m excited” she said.
Another beneficiary, Jummai Jubrin, said she got a N550,000 TCF loan last month and used it to buy additional tools for his automobile repair business.
“I added money and bought a diagnostics machine for the latest model of cars. It’s scarce in Dutse. I can now diagnose vehicles and make money from it. If the owner wants, I’ll repair the vehicle after the diagnosis but diagnosing alone is N10,000. I am very happy”, she said.
Also appreciating the apex bank for its interventions, the presidents of the Rice Farmers Association of Nigeria (RIFAN)- Alhaji Alhaji Aminu Goronyo; National Cotton Association of Nigeria – Mr. Anibe Achimugu; Maize Association of Nigeria – Alhaji Bello Abubakar; and the Maize Growers, Processors, and Marketers Association of Nigeria – Dr. Edwin Uche attested to the success of the CBN ABP, which they noted had enhanced the value chains of their respective commodities.
However, the president of the Nigerian Textiles Manufacturers’ Association, Folorunsho Daniyan, has appealed to the CBN to fulfill its promise to ensure larger domestic patronage to drive growth in the sector and increase job opportunities.
He has also urged the apex bank to intervene in the area of production cost, adding that this will enable the sector become competitive and contribute significantly to the nation’s GDP.
“If these infrastructures are not improved, definitely, we can’t employ them, and something needs to be done for us to compete locally and internationally.
“We just have the name but we are not contributing to the GDP of the country, our contribution formerly amounted to 25% of the GDP. But now our contribution is insignificant”, he said.