By Bassey Udo
Amid the impact of the COVID-19 pandemic, which devastated the global economy, including Nigeria, the Godwin Emefiele-led Central Bank of Nigeria has managed to steer the country’s economy to not only remain vibrant, but diversified.
Through innovative coordination of monetary policy instruments with fiscal policies and programmes, Emefiele has ensured the CBN mobilise growth and created a mix of opportunities across key sectors, like the ICT, Manufacturing, Solid Minerals, Trade and Agriculture.
As part of the new vision he unfolded in June 2019 to herald his second five-year tenure, Emefiele
promised to work closely with the fiscal authorities to target a double digit growth; bring down inflation to single digit, and accelerate the rate of employment.
Also, CBN’s priorities under his new mandate, Emefiele said, were to preserve domestic macroeconomic and financial stability; foster the development of a robust payments system infrastructure to increase access to finance for all Nigerians and ensure financial inclusion; 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.
Whether he has been able to tick all the boxes in all he promised to do is not for lack trial, but more for several unforeseen developments that affected not only the Nigerian economy, but the world at large.
These priorities were outlined, perhaps, without any hint about the jolting impact of COVID-19 pandemic on the global economy the following year, even as the country’s economy was still struggling to come out of one of the worst recessions in several decades.
It was a period characterized by a sharp decline in crude oil prices, and equally sharp drop in monthly accruals from crude oil exports and foreign reserves.
That challenging period demanded bold and innovative intervention programmes to make the apex bank a financial catalyst to strategic sectors, stabilise the economy and stop the fragile recovery from relapsing into another recession.
To solve the immediate and long-term economic challenges of the country, the CBN governor spearheaded the provision of appropriate incentives to create an enabling environment for innovative entrepreneurs to drive growth and development.
To check spiralling inflation and cushion the impact of the crash in foreign exchange supply in the economy, Emefiele ensured the CBN not only resolve to tighten the monetary policy rate for a long consecutive period, but introduce demand management strategies to conserve the nation’s foreign reserves, while supporting the domestic production of select goods.
To encourage manufacturers to focus of the local production of certain items the country was importing at huge cost to the national reserve, the CBN introduced policy restrictions of access to foreign exchange for raw materials for 43 items, four of which accounted for over NI trillion of the country’s annual import bills.
Beyond these measures, the CBN established an Investors and Exporters Window (I&E), to allow for the purchase and sale of foreign exchange at controlled market rate.
Also, the introduction of the “Revised Guidelines for the Operation of Nigerian Inter-bank Foreign Exchange Market” in June 2016 introduced the Naira-settled Foreign Exchange Futures Market, while commercial banks were allowed to go after Nigerians who engaged in roundtripping by buying dollars under the pretense of traveling abroad and ended up diverting it.
Apart from sanctioning Bureau De Change (BDC) operators that aided illegal foreign exchange trading, the CBN has discontinued the sale of foreign exchange to the Bureau operators in the country, while suspending the licensing of new BDCs.
The introduction of the ‘Naira 4 Dollar Scheme’ was part of the apex bank’s effort to encourage diaspora remittances.
Besides, since the discontinuation of the foreign exchange allocation to BDCs as part of the CBN’s demand management policy, the Naira, to a large extent, has remained stable at the I & E window, as the official and NAFEX exchange rates move towards a convergence.
The stable exchange has made it possible for commercial banks to meet the demands for foreign exchange by small and medium enterprises (SMEs), payment of school fees, medical and personal travel allowance (PTAs).
In addition, the intervention by the CBN ensured the country’s current account deficit narrowed significantly as a result of a surplus position in the goods account, due to a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittances.
To cut down on foreign exchange demand pressure and facilitate investment, the CBN, on April 27, 2018, signed a 3-year bilateral currency swap agreement of $2.5 billion, equivalent to ¥15.0 billion, or N720 billion with the Peoples Bank of China (PBoC.)
As part of its long-term strategy to strengthen the country’s economy, the CBN established specific initiatives to resolve the challenges to achieving long-term GDP growth and economic productivity.
Apart from deploying policies to increase credit allocations to key productive sectors of the economy at reasonable interest rate, the CBN said this would help in diversifying the country’s economic base, stimulate output growth, create jobs and significantly reduce import bills.
To provide long-term finance for infrastructure development in the country, the CBN, in partnership with African Finance Corporation and the Nigerian Sovereign Investment Authority, set up the Nigeria InfraCorp, to use private capital to support infrastructure investment across critical sectors.
To create jobs, diversify the economy away from crude oil, accelerate growth of the economy and reduce poverty, the CBN established intervention programmes, such as Anchor Borrowers Programmes (ABP), Commercial Agricultural Credit Scheme (CACS), Creative Industry Financing Initiative (CIFI), MSMEDF, CBN Agribusiness, Small and Medium Enterprises Investment Scheme (AgSMEIS) and the Real Sector Support Facility (RSSF).
Recently, the apex financial sector regulator, in consultation with the Bankers Committee introduced the “Race to $200billion in FX Repatriation” for non-oil exports, aimed at repatriating $200 billion from non-oil exports, over the next 3-5 years.
The programme is anchored on value-adding exports, non-oil commodities expansion, non-oil reign exchange rebate scheme, dedicated non-oil export terminal, and biannual non-oil export summit.
To encourage Nigerians to consume what they produce, add value, and export the surplus, the CBN recently introduced the Produce, Add Value and Export (PAVE) scheme, to fast-track the development of various substitutes to crude oil export and encourage backward integration for the local production of select items.