Obinna Chima highlights efforts by the Central Bank of Nigeria under the leadership of Godwin Emefiele to support domestic production and non-oil exports in the country
Nigeria with current population of over 200 million people and variety of natural resources, there is no doubt that domestic production is the way to go for the country. That is why successive governments over the years have designed programmes and initiatives to encourage local production of goods and services and in most cases, encourage exports of goods and services in the non-oil sector.
Indeed, since he assumed the position of the Governor of the Central Bank of Nigeria (CBN), almost nine years ago, Mr. Godwin Emefiele, has been unrelenting in his advocacy for the support of domestic production in order to arrest the high level of youth unemployment in the country, lessen the alarming level of insecurity in the country, boost the country's Gross Domestic Product (GDP) and encourage exports.
A lot of finished products in Nigeria are imported from countries that have developed a very vibrant manufacturing industry. These countries have profited from the developmental benefits that a flourishing manufacturing sector provides.
That is why despite the challenges and distractions it has had to contend with over the years, the apex bank under the leadership of Emefiele has taken major leaps to support the diversification of the economy away from largely oil-based economy through its numerous interventions. Today, the country has moved from depending on rice importation to being an exporter of the product.
Since Emefiele came on board, the CBN has supported non-oil sectors such as agriculture, manufacturing, health care, education, power and aviation and other allied economic value chains
The building of a more sophisticated economy anchored on agriculture, MSMEs, industrial and manufacturing concerns has become the major component of the bank's monetary policy, in view of the recent challenges posed by the impact of Covid-19 and the Russia invasion of Ukraine.
The Emefiele-led CBN saw weakness on the part of the fiscal authorities because the fiscal space was narrow and the space to release money to catalyse the economy on the fiscal side was slim, prompting the apex bank to increase its intervention in the economy.
In fact, the apex bank's flagship Anchor Borrowers' Programme (ABP) that heralded the rice revolution in Nigeria, changed the long-standing dependence on imported rice as the country is not only depending on domestic production, but has become a rice exporting country.
In addition, there is also the Commercial Agriculture Credit Scheme (CACS), a major special purpose vehicle to support commercial farmers in the country in different value chains including oil palm, cotton, cocoa, among others.
"Nigeria has largely depended on the oil sector for revenue generation over the past four decades and the sustained decline in crude oil production continues to negatively undermine the performance of the economy. Thus, there is the urgent need for a conscientious effort to diversify to other non-oil sectors. "As I have often said, it is important that we work to create an economy that will enable us feed ourselves, create jobs for our teeming youths and improve the standard of living of our people.
"With our population growing by over three percent per annum over the past seven years, against a less than steady growth in output since 2019, expanding the production and industrial capacity of the economy must be given special attention to ensure overall macroeconomic stability," Emefiele stressed recently.
He explained: "In the agriculture sector, we found that the big problem we have is the movement of goods from farm to market. It is a logistics and transportation problem. We got approval from the Presidency to reposition the Nigeria Commodity Exchange which plays a pivotal role in the movement of goods from farm to market. Another important move is the creation of the Infraco. You all know that infrastructure has been a problem in Nigeria.
"We are trying to set up a world class infrastructure to begin to see how to revamp Nigeria's infrastructure without placing a burden on the federal government. So, the question now is where do you (Nigerians in the diaspora) stand? We would like you to come join and work with us."
According to Emefiele, "our continued support to the manufacturing sector and MSMEs have been yielding great results as the implementation of 44 items not valid for FX for imports has revealed. Our intervention in the health sector, for example has begun to reduce the health care tourism being sought outside the country which is helping to conserve our foreign exchange and improve our well-being.
"Furthermore, the 100 for 100 Policy on Production and Productivity (PPP), which is targeted at harnessing our local raw materials to increase our domestic production, as well as exports through our deliberate credit and other supports, will soon begin to yield quality results.
"Moreso, the RT200 FX initiative designed to take advantage of our large domestic production to other regional markets is targeted to increase foreign exchange inflows to the economy and support exchange rate stability. In addition, the on-going work at the Dangote Refinery, when fully completed, will stop fuel importation just as we witnessed in cement, sugar and fertilizer market."
Just last week, in line with his unrelenting push to support the diversification, Emefiele, disclosed that the Race to $200 billion in foreign exchange (FX) repatriation programme (RT200) of the bank has boosted repatriation of funds into the country by 40 per cent in 2022. In the first quarter of 2023, the country recorded $1.7 billion inflows due to the non-oil export initiative.
Speaking during the third edition of the biannual RT200 non-oil export summit held in Lagos, where stakeholders converged to discuss, "RT200: Challenges and Prospects to Success," Emefiele also said the apex bank was monitoring some shipping companies aiding and abetting the smuggling of goods, warning that there were plans to sanction such companies by placing a post-no debit (PND) on the bank accounts.
Emefiele said: "Today, I am happy to note that the RT200 programme has made good progress in export proceed repatriation since its establishment in February 2022.
"When we started between February and March, it was only $62 million, by the second quarter it had risen to about $600 million and by the third quarter it had risen to over $900 million.
"Available data shows that repatriation due to the programme increased by 40 per cent from $3 billion in 2021, to $5.6 billion at the end of 2022. The momentum for 2023 is equally showing strong numbers and impressive prospects.
"In the first quarter of 2023, a total of $1.7 billion was repatriated to the economy while about $790 million was sold at the investors and exporters' (I&E) window year-to-date. The balance of the proceeds remained in the Export Domiciliary Accounts of exporters.
"Please note that proceeds that are not sold at the I&E window cannot and will not be eligible for rebate. So, we encourage those holding their export proceeds in their domiciliary accounts to take advantage of the rebate by selling at the I&E window."
He said shipping companies involved in smuggling goods out of the country would be penalised and urged them not to encourage criminality.
Emefiele added: "All we do is to monitor and appeal to exporters and for people to export and when they do export, that they should repatriate their proceeds for the good of their company and the country in general.
"We keep hearing cases of people trying as much as possible to sidestep the process and all I can do now is to appeal to those of us who want to export without documentation to please try as much as possible to desist from this practice.
"We will continue to engage customs, we will continue to engage the Nigeria Ports Authority and we will continue to engage the shipping lines and agents to ensure that we nip in the bud the incidences of exporting without documentation."
Lagos state Governor, Babajide Sanwo-Olu commended the CBN, even as he said he anticipated that the summit would birth more policies that would encourage more non-oil exports.
Sanwo-Olu, who was represented by the Commissioner in charge of Economic Planning and Budget, Mr. Samuel Egube said: "The Central Bank of Nigeria is demonstrating serious commitments to the success of these initiatives through a range of incentives, aimed at encouraging increased activities in the non -oil export sector as well as repatriation of foreign exchange into the Nigerian economy.
"It is also encouraging to note that this program, in addition to several other initiatives by the federal government is yielding the desired results as shown by the recent reports of the Nigerian Export Promotion Council indicating that our non-oil exports grew by about 40 per cent in 2022 to $4.2 billion.
"We must be courageous and think deeply in evaluating all ideas and figuring out how to combat even some of our challenges, including topical issues, like the human resource exports, also known as the 'Japa' phenomenon into sustainable advantages for national developments and a source of non-oil exports that could result in huge diaspora remittances."
REAL SECTOR INTERVENTIONS
Today, the central bank's interventions aimed at stimulating production and productivity across the real sector showed that between January and February 2023, N12.65 billion was disbursed to three agricultural projects under the Anchor Borrowers' Programme, bringing the cumulative disbursement under the Programme to N1.09 trillion to over 4.6 million smallholder farmers cultivating or rearing 21 agricultural commodities on an approved 6.02 million hectares of farmland across the country.
Interestingly, total repayments under the Anchor Borrower Programme is presently at 52.39 per cent of total exposure and the central bank has continued to reiterate its commitment to its developmental mandate of stimulating access to finance for the real sector.
Some of the commodities that have received support under the Anchor Borrowers' Programme include rice, wheat, cowpea, millet, maize, cotton, fish, soya bean, poultry, cassava, groundnut, ginger, sorghum, oil palm, cocoa, sesame, tomato, castor seed, yellow pepper, onions, and cattle/dairy.
The programme which was introduced by the Emefiele-led CBN has contributed significantly to increased national output of focal commodities, with maize and rice peaking at 12.2 million metric tonnes and 9.0 million metric tonnes in 2021 and 2022, respectively, as the Acting Director, Corporate Communications, CBN, Dr. Isa Abdulmumin revealed recently.
According to the CBN spokesman, the programme had also helped to improve the national average yield per hectare of these commodities, with productivity per hectare almost doubling within the eight years of the Programme's implementation.
Additionally, the central bank has also released the sum of N23.70 billion under the N1 trillion Real Sector Facility to eight new real sector projects in agriculture, manufacturing, and services. Cumulative disbursements under the Real Sector Facility currently stands at N2.43 trillion, disbursed to 462 projects across the country, comprising 257 manufacturing, 95 agriculture, 97 services and 13 mining sector projects.
Under the 100 for 100 Policy on Production and Productivity (PPP), designed to fast track productive activities in priority sectors, the central bank has also supported a lot of local manufacturers. It has released N3.01 billion under the Nigerian Electricity Market Stabilisation Facility (NEMSF-2) for capital and operational expenditure of distribution companies (Discos) aimed at improving their liquidity status and aid their recovery of legacy debt, with the cumulative disbursement under the facility at N254.39 billion.
RICE REVOLUTION
The CBN-led rice revolution initiative has also yielded positive impact with over 750 per cent increase in local production. Today, Nigeria can now boost of about 60 integrated rice mills with a combine production capacity of three million metric tons as against less than 350,000 metric tons capacity with 10 integrated millers before the Anchor Borrower Programme commenced in 2015.
Although, the country's local production was still below expectation considering the potentiality, Nigeria has made giant stride compared to the capacity before 2015.
"When the Buhari administration came on board in 2015, he directed that we must start thinking on how to diversify the economy rather than relying solely on oil. The president emphasised that we must grow what we eat and eat what we grow.
"That was when he took all the governors to Kebbi State and personally planted a seed of rice. Incidentally, that seed has grown into Nigeria rice revolution we are witnessing today. Before the Anchor Borrower Initiative in 2015, the country has less than 10 integrated rice mills with combine capacity of 350 metric tons. Today, we have over 60 integrated mills with capacity of 3 million metric tons," Emefiele said.
TEXTILE SECTOR INTERVENTION
The CBN also invested over N120 billion across the Cotton, Textile and Garment (CTG) value chain since the inception of its intervention programme in the industry. Through its development finance initiatives, over 320,000 farmers had been financed between 2018 to date. This was expected to enhance the production capacity of the ginneries in producing over 102,000 metric tonnes of cotton lint, which should meet and surpass the cotton lint requirement of the textile industry in the country. The domestic demand for cotton is currently met through local production, thereby halting the importation of cotton for the textile industry as well as increasing capacity utilisation of ginneries, which now operate throughout the year compared to months in the recent past.
In all, over 20 ginneries had been resuscitated nationwide and more are expected to become operational this year.
He said the apex bank's enhanced drive toward anti-smuggling was already yielding positive result with over 15 textile smugglers' accounts frozen.
"A lot of progress has been made, but at the same time more needs to be done to ensure that we build an inclusive economy that supports domestic production of goods and services, while offering job opportunities to teeming Nigerians.
"This assignment has been bestowed upon us all by the President of the Federal Republic of Nigeria, Muhammadu Buhari, who remains extremely supportive of the agricultural sector revolution due to its role in ensuring food security, creating jobs and stabilising the Nigerian economy," CBN's Deputy Governor in charge of Corporate Services, Mr. Edward Adamu explained.
Adamu said the revival of the textile sector remained vital to the country's growth objectives, adding that the CBN's interventions were designed to resuscitate and return the industries back to its glorious days of job creation, economic diversification and achieving self-sufficiency in cotton production as well as minimise and eradicate smuggling and dumping of textile goods and facilitation foreign reserves' accretion.
On his part, CBN Director, Development Finance Department, Mr. Yila Yusuf, identified smuggling of textiles as the biggest challenge in the efforts to reposition the sector.
"As you are aware a lot of them (smugglers) their accounts have been blocked. As restitution, we are telling them to go patronise the local textile factories," he said.
He said the CBN was also working with the uniform services to enhance patronage of locally-made fabrics which are of high quality.
FINANCIAL SYSTEM STABILITY
While it is on record that some developed countries have recorded bank failures in recent times, the Nigerian banking sector has remained safe and sound. We have seen for examples, one of the most iconic financial institutions in the world, Credit Swiss of Switzerland that collapsed last month; in the United States, three significant, although regional commercial banks filed for bankruptcy - the Silicon Valley Bank, Signature Bank and First Republic Bank. Now, in the last 40 years, we have had about 90 banks in the US, with assets of over $1 billion collapse.
This was why Emefiele recently advised governors of central banks and other African financial sector regulators to improve their supervisory roles to forestall any run on financial institutions in their countries. Commenting further on the current global dynamics and specific policy developments in Nigeria to address emerging shocks, he advised central banks on the continent to draw lessons from the recent failures of four financial institutions.
He highlighted measures the CBN took to avoid contagion effects on banks in the country.
Emefiele, while sharing Nigeria's experience in regulating banks, noted that the threats posed to the financial system necessitated the release of new guidelines and regulations to tackle potential infringements and, in the process, protect depositors' funds as well as promote greater transparency in the sector.
Emefiele told his audience that, "regulators must be prepared for what I call the rainy day. What umbrella have you built to ensure that depositors don't face the risk of losing their deposits? That should be a lesson to regulators globally.
"People have always said that the Nigerian banking system is one of the most regulated. We are not saying there are no cases where banks have crisis in Nigeria, but we try as much as possible to ensure that we insulate the banking system from serious occurrences.
"It is only in Nigeria and very few countries in the world that you would hear that if a bank collects for instance, $100 from a customer as deposit, today, $32.5 of that must be kept at the CBN.
"It is to keep that fund to make sure in this kind of situation where they are crisis; we also maintain that bank would maintain a specified liquidity ratio and it is only in Nigeria that we insist that banks must have a minimum level of capital adequacy ratio.
"It is Nigeria and some few countries in the world that if you are a young bank, after declaring profit, we insist that 25 per cent must be held in a statutory reserve fund to boost your retained earnings and capital adequacy ratio. These are the kind of things regulators need to begin to look at increasingly. So, as a regulator, you need to begin to think of how to insulate your banking industry. Regulators must begin to begin to be much more responsible.
"We have often said it that in Nigeria, we believe that when there is a crisis, we make sure that depositors are protected and we make sure no depositor loss their money."
FINANCIAL INCLUSION AND eNAIRA
The global economy is now characteried by rapid digitalisation across all sectors, particularly the financial system where Nigeria remains the leader of innovation and out of the box thinking.
As part of apex bank's efforts in entrenching a resilient payments system, it has over the years established strategic initiatives and policies in the financial sector such as the Payments System Vision 2020 (2007), National Financial Inclusion Strategy (2012, 2018), Cash-less Policy (2012), Framework for Regulatory Sandbox Operations (2018, 2021), Open Banking Initiative (2021), among others.
Under the National Digital Economy Policy and Strategy (2020 - 2030), the industry is poised to accelerate the private sector-led efforts towards building a nation where digital innovation and entrepreneurship are used to create value and prosperity for all.
Consequently, the Nigerian payment ecosystem has witnessed tremendous improvement over the years. To consolidate its efforts towards engendering a digital economy, the Bank deployed the eNaira, Africa's first Central Bank Digital Currency (CBDC) in preparation for the payment landscape of the future, given the potential benefits that will accrue to a digital economy.
The eNaira provides Nigerians with a cheap, generally accepted, safe and trusted means of payment and seeks to enhance financial inclusion, support poverty reduction, enable direct welfare disbursement to citizens, support a resilient payments ecosystem, improve availability and usability of central bank money, facilitate diaspora remittances, reduce the cost of processing cash, and reduce cost and improve efficiency of cross-border payment among others.
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Through the evolution of offline payments channels like agent networks, USSD, wearables, cards and near field communication technology, the eNaira would give access to financial services to underserved and unbanked segments of the population.
The eNaira platform also provides an innovative layer for products and services to be built with the aim of enhancing Nigerians' participation in the digital economy and promote further development of a burgeoning Fintech ecosystem.
Whilst celebrating the successes achieved following the launch of the eNaira and the global recognition of the great job on-going by the CBN, it must be acknowledged that the journey ahead requires cutting-edge innovation and out of the box thinking to achieve the set-out objectives of economic diversification.
Consequently, out of the box solutions would be the ones that drive financial inclusion, SME growth and the creation of start-ups; facilitate cross border trades and transfers as well as international remittances and FX exchanges; ensure effective implementation of welfare-inclined government programmes; and enhance efficiency in the interbank market.
The COVID-19 came with a lot of disruptions that affected economic activities in country across the world. The pandemic which started as a health crisis transformed to an economic crisis and necessitated response from fiscal and monetary policy authorities across the globe, including in Nigeria.
In Nigeria, in line with the first-responder approach, the Emefiele-led central bank acted swiftly, almost when the first case broke out in the country by unveiling a raft of measures to moderate the impact of the virus on households, businesses as well as the economy.
Precisely, Emefiele announced an extension of the moratorium on the apex bank's interventions programmes, interest rate reduction, creation of a N100 billion targeted credit facility; N100 billion health sector intervention facility and N1 trillion for the manufacturing sector. Some other measures included strengthening the central bank's Loan to Deposit Ratio (LDR) policy and regulatory forbearance.
Also, as part of efforts to stimulate infrastructural development across the country, the CBN, working with the fiscal authorities also established a N15 trillion infrastructure development company (Infraco).
In addition, Emefiele was also instrumental to the formation of the private-sector-led Coalition Against COVID-19 (CACOVID), which was able to mobilise billions of naira and has immensely supported the country's COVID-19 fight by setting up healthcare facilities across the country as well as in distributing palliatives to states.
The health sector facility provided loans to pharmaceutical companies to expand/open their drug manufacturing plants in the country and also for hospitals and healthcare practitioners to expand/build health facilities.
As part of efforts to stimulate infrastructural development across the country, the CBN, working with the fiscal authorities also established a N15 trillion infrastructure development company (Infraco).
To Emefiele, the disruptions caused by the pandemic was an opportunity to re-echo a persistent message the CBN has been sending for a long time, on the need to reset the economy and to birth "a new Nigeria."
According to him, for a country of over 200 million people, projected to be almost 450 million in a few decades, "we can no longer ignore repeated warnings about the dangers that lie ahead if we do not begin to depend largely on what we produce locally because the security and well-being of our nation is contingent on building a well-diversified and inclusive economy."
This, he said informed the central bank's aggressive development finance interventions.
"The CBN has indeed created several lending programmes and provided hundreds of billions to smallholder farmers and industrial processors in several key agricultural produce. These policies are aimed at positioning Nigeria to become a self-sufficient food producer, creating millions of jobs, supplying key markets across the country and dampening the effects of exchange rate movements on local prices," he explained.
This philosophy, according to Emefiele, has been the consistent theme of the CBN's policies over the last couple of years, just as he cited the restriction of access to foreign exchange from some items at its window.
Emefiele said: "Many times, the bank has been accused of promoting protectionist policies. My answer has always been that leaders are first and foremost accountable to their own citizens.
"And if the vagaries of international trade threaten their well-being, leaders have to react by compelling some change patterns of trade to the greater good of their citizens."
He said the measures were deliberately designed to both support the federal government's immediate fight against COVID-19 and also build a more resilient, more self-reliant Nigerian economy.
Generally, there is need for Nigerians to continue to support the federal government and the central bank in the quest to deliver high-quality infrastructure, encourage domestic production in large-scale so as to diversify the economy.
