By Bassey Udo
The interventions by the Central Bank of Nigeria in various key sectors of the country’s economy have succeeded in stabilizing, diversifying and setting it on the path of recovery, the apex bank’s governor, Godwin Emefiele, has said.
Emefiele was speaking in Akure on Thursday through the Deputy Governor (Corporate Services), Edward Adamu, who declared open the 32nd Seminar organised by the bank for Finance Correspondents & Business Editors on the theme: “Exchange Rate Management and Economic Diversification in Nigeria – The Produce, Add-Value and Export Option.”
The focus of the seminar on the management of monetary policy, he said, showed the support for the economic development of the country through sustained emphasis on diversification.
As a developing economy, he said the CBN’s approach to monetary policy was by being innovative through the use of available instruments, and coordinating well with fiscal policy to address the numerous developmental challenges the country was facing.
With the enabling statute, Emefiele said his leadership at CBN was empowered to intervene where and when necessary in the economy, through various development finance initiatives, whose outcomes have so far justified the approach.
He recalled that by June 2014 when he assumed office, the economy was facing a number of challenges, including declining price of crude oil; impact of geo-political tensions, and post-global economic and financial crisis, which caused acute capital flow reversals in emerging markets like Nigeria.
The country’s external reserves, he said, dropped from about $62b in 2008 to about $37b, while the sharp drop in crude oil prices resulted in a sharp decline in the monthly foreign earnings from about $3.2b to less than $1.0b.
These adverse conditions, the CBN governor recounted, eventually plunged the economy into a recession for the first time in about a quarter of a century, with reports about the depletion of the country’s foreign reserves and the depreciation of the Naira.
That period, Emefiele said, called for bold and innovative decisions about what to do to reverse the ugly trend.
As part of his vision for the CBN he unveiled in 2014, Emefiele said he pledged to build a Central Bank that was professional, apolitical and people focused.
“My mission was and still is, to bequeath a Central Bank that focuses on building a resilient financial system that can serve the growth and development needs of our beloved country, Nigeria,” he said.
The CBN, he said, was to act as a financial catalyst by targeting strategic sectors that could create jobs on a mass scale and reduce the country’s import bills.
To solve the immediate and long-term economic challenges of the country, he said the CBN needed to create an enabling environment with appropriate incentives to empower innovative entrepreneurs to drive growth and development.
To contain inflation and cushion the impact of the drop in the supply of foreign exchange in the economy, he said CBN did not only tighten the monetary policy stance over a period, it also introduced demand management approaches to conserve the country’s reserves and support the domestic production of certain goods.
Besides, he said the CBN encouraged manufacturers to consider local options in sourcing for raw materials by restricting access to foreign exchange on some items the country has capacity to produce locally, four of which items accounted for over NI trillion of the country’s annual import Bills.
In addition to these measures, he ssid the CBN also established an Investors and Exporters Window (I&E), to allow for the purchase and sale of foreign exchange at prevailing market rate.
Also, he ssid the CBN liberalized the foreign exchange market through the “Revised Guidelines for the Operation of Nigerian Inter-bank Foreign Exchange Market” in June 2016.
Other measures introduced by the CBN included partnership with commercial banks that support roundtripping of the dollar by some Nigerians; sanctioning of Bureau De Change (BDC) operators for illegal foreign exchange trading and discontinuarion of the sale of foreign exchange to the Bureau operators in Nigeria.
Again, the bank suspended the licensing of new BDCs, while introducing the ‘Naira 4 Dollar Scheme’ to encourage diaspora remittances.
As a result of the CBN intervention in the foreign exchange market through its demand management policy, Emefile said the Naira has remained largely stable at the I & E window, particularly since the discontinuation of FX allocation to Bureau De Change operators.
Today, he said banks are able to meet the demands of their customers seeking foreign exchange for small and medium enterprises (SMEs), school fees, medical and personal transport allowances (PTAs).
Also, he said the country’s current account deficit has narrowed significantly due to a surplus position in the goods account as a result of a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittances.
As part of its long-term strategy for strengthening the Nigerian economy, Emefiele said the apex bank established specific initiatives to resolve the challenges to long-term gross domestic product growth and economic productivity.
Such initiatives, he said, included measures to increase credit allocations to pivotal productive sectors of the economy at reasonable interest rates, to diversify the base of the economy, stimulate output, create jobs and significantly reduce import bills.
In line with the CBN’s belief that the banking sector must provide long-term finance for infrastructure development in the country, he said InfraCorp was established in partnership with African Finance Corporation and the Nigerian Sovereign Investment Authority, to use private capital to support infrastructure investment in critical sectors of the economy.
The CBN’s approach, especially in the management of financial system liquidity, foreign exchange market and development financing initiatives, Emefiele said, have succeeded in optimally balancing the delicate objectives of price stability and real output growth.
To create jobs and diversify the economy away from crude oil, he said the CBN established numerous intervention programmes, such as Anchor Borrowers Programmes (ABP), Commercial Agricultural Credit Scheme (CACS), Creative Industry Financing Initiative (CIFI), micro, small and medjum enterprise development finance (MSMEDF) , CBN Agribusiness, Small and Medium Enterprises Investment Scheme (AgSMEIS) and the Real Sector Support Facility (RSSF), among others, with success stories in accelerating growth of the economy and reducing poverty across the country.
Recently, he said the CBN introduced the “Race to $200 billion in FX Repatriation” for non-oil exports towards attaining $200 billion in FX repatriation from non-oil exports, over the next 3-5 years.
Besides, the Produce, Add Value and Export (PAVE) initiative, he said, was expected to encourage Nigerians to consume what they produce, add value to it, and even export the surplus.
To mitigate the impact of COVID-19 pandemic on the economy, the CBN governor urged Nigerians to join hands to ensure the success of PAVE.
Despite the headwinds associated with the pandemic, he ssid the apex bank was able to ensure Nigeria remained a vibrant economy with a diversified mix of opportunities across sectors such as ICT, Manufacturing, Solid Minerals, Trade and Agriculture.
