Emefiele, CBN: Pulling A Nation From The Brink

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The Central Bank of Nigeria (CBN), on God- win Emefiele’s watch, has transformed from the status of a banking sector regulatory agency of government concerned about monetary policies and financial systems stability to one that is, in the true sense of the term, Nigeria’s engine of economic growth.

One that has galvanized and catalyzed the broad spectrum of the nation’s economy through a well thought out policy framework that has touched almost every sector encouraging them to be more effective in their contributions to national development.

The story of the nation’s economy when he came on board is already well known with most of the key performance indices (KPIs) not what they ought to below revenue earning from oil, decline in foreign re- serve and slump in Gross Domestic Product (GDP).

All these were fallouts from a world economy that was on a tailspin.

Unfazed, Emefiele read the situation and made it clear that the solution to the nation’s laggard economy lay in the necessity to diversify. Over dependence on oil and gas with all the volatility in the industry was not helpful to an economy desirous of lifting itself from the quagmire of underdevelopment with the attendant negative implica- tions of unemployment, im- port dependency and low capacity utilization.

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What To Do

Emefiele came out with a five-year policy plan and a 10 point agenda which seek to strengthen risk- based supervision mechanism of Nigerian banks to ensure overall health and banking system stability; build sector-specific expertise in banking supervision to reflect loan concentration of the banking industry; abolish fees associated with limits on deposits and reconsider ongoing practice in which all fees associated with limits on withdrawals accrue to banks alone;

introduce a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, and oil and gas; stablish Secured Transaction and National Collateral Registry as well as establish a National Credit Scoring System that will improve access to information on borrowers and assist lenders to make good credit decisions; and build resilient financial infrastructure that serves the needs of he lower end of the market, especially those without collateral all targeted at rebuilding the economy and putting it on an even keel.

The implementation of this plan was undergirded by the determination to open up the economy away from heavy dependence on petroleum and other imported items that can be produced in the country. Emefiele went ahead with measures geared at reducing the huge sums spent by the country on import- ing items such as fish and rice, which went as high as N1.3 trillion a year.

Available data indicate that the country currently produces about 53.0 million metric tonnes but with a very low average yield of about 7.7 metric tonnes per hectare, compared with Indonesia’s 23.4 metric tonnes per hectare and 22.2 metric tonnes per hectar in Thailand.

These early measures were not enough to prevent the economy from going into recession in the third quarter of 2016. However, Emefiele crafted some un- conventional policies, (unconventional in the sense that they were not considered to be part of the core mandate of the apex bank), to reverse the trend in record time. And he succeeded.

The first step the Bank took was to tighten money supply in order to contain inflation while improving yields in local bonds, which attracted the attention of foreign investors.

Next, the CBN moved to encourage local manufacturers to consider local options in sourcing their raw materials, by restricting access to foreign exchange on some items.

Then, it introduced the Investors and Exporters FX (I&E) window, which allowed investors and exporters to purchase and sell foreign exchange at the prevailing market rate.

To forestall further depletion of the nation’s external reserves, the CBN ensured greater flexibility of the foreign exchange market by prioritizing the most critical needs for foreign exchange.

The bank restricted access to the foreign exchange market for different categories of commodities.

The dogged implementation of the Bank’s policy of restricting access to access to forex from the Nigerian forex market to what is now a list of 43 items, has no doubt led to huge improvements in the domestic production of those items and a reduction in Nigeria’s import bill.

From an average of about US$5.5 billion, the nation’s monthly import bill had fallen consistently to US$2.1 billion in 2016 and US$1.9 bil- lion by half year 2017 to less than $1 billion in 2018, there- by reversing the trend where imports were a drag on the nation’s foreign reserves.

The rice revolution, through the Anchor Borrowers’ Pro- gramme (ABP), has seen a drastic reduction in the impor- tation of rice. Going by figures obtained from various official sources, the volume of rice importation into Nigeria (in met- ric tonnes) declined drastically in 2018, to the extent that India and Thailand, two dominant rice exporters to Nigeria, were only able to export about 5,161 metric tonnes and 426 tonnes of rice, respectively, to Nigeria as at the end of 2018. The policy of the Bank also led to a boost in the local production of other crops

Besides rice and cassava, the CBN is supporting value chains in maize, tomatoes, cotton and lately palm produce.

Determined to ease pressure on the naira, the Central Bank of Nigeria signed a bilateral cur- rency swap agreement with the Peoples Bank of China (PBoC).

The transaction, valued at Renminbi (RMB) 16 billion, or the equivalent of about $2.5 billion, aims at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies.

Among other benefits, this agreement is providing Naira liquidity to Chinese businesses as well as RMB liquidity to Nigerian businesses respectively, thereby improving the speed convenience and volume of transactions between the two countries.

As part of its developmental mandate, the CBN, in the past five years, has also established, single- handedly or in conjunction with the Bankers’ Committee, various other initiatives all aimed at creating wealth and putting in place strong policies for creating jobs for the country’s growing youth population. In addition to the hugely successful Anchor Borrowers’ Pro- gramme (ABP), the CBN is focusing on other policy measures that are aimed at giving the economy a breather.

These include the Nigeria Incentive-based Risk Sharing System for Agricultur- al Lending (NIRSAL), the National Food Security Programme (NFSP), the Paddy Aggregation Scheme (PAS), the Agri-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS) and the Accelerated Agricultural Development Scheme (AADS). Others are, Youth Entrepreneurship Development Scheme (YEDP), the Nigeria Electricity Market Stabilization Facility (NEMSF); and the Non-Oil Export Stimulation Facility (NESF) and Export Development Facility (EDF).

Looking back at the monetary policy terrain of Nige- ria in the past five years, it is very clear that the CBN, in addition to its mandate of ensuring price and financial stability, has greatly supported the development and growth of the Nigerian economy. This is hinged on his belief that the future remains very bright for the Nigerian econ- omy as it possesses all that is required to reclaim and cement her place as the largest economy in Africa.

Fixing the Agricultural Value Chains in Nigeria

Last year was an eventful year for the agricultural sec- tor in Nigeria. Although the oil and gas sector continued to maintain its position as the largest contributor to the country’s external earn- ings, the agricultural sector made significant progress in contributing 29.25 per cent to the country’s real Gross Domestic Product (GDP) in the third quarter compared to the figure of 22.78 percent in the second quarter.

The CBN has taken development financing a notch higher because it believes that diversifying the Nigerian economy will not only make her self-sufficient in food production and industrial raw materials, but also create jobs for its teeming youth population. In the view of Emefiele, the CBN is sustaining its intervention efforts in order to help catalyze growth in critical sectors of the economy such as Agriculture and the Manufac- turing Sectors.

Indeed, the rice revolution, through the Anchor Borrowers’ Programme, has seen to a dras- tic reduction in the importation of rice. Going by figures obtained from various official sources, the volume of rice importation into Nigeria (in metric tonnes) has continued to decline drastically.

Cotton

Like the rice sector, the Cotton, Textile and Garment (CTG) in- dustry also enjoyed a flurry of in- tervention activities in 2019. The objective was clear: Catalyze the local farmers to produce 450,000 metric tonnes of cotton in three years, which, at 40 per cent con- version rate, translates to 18,000 metric tonnes of yarn. In addition, the CBN and other stakeholders sought to increase cotton pro- duction from 80,000 to 200,000 in 2020; increase capacity of gin- neries and textile sector industries in Nigeria to enable it attain self- sufficiency in cotton production in Nigeria by 2020.

Cassava

Following its game-changing success in the rice and cotton sectors, the CBN also sought to modify the narrative in the cassava sector by resuscitating the cas- sava value chain in Nigeria.

The implementation of this plan was undergirded by the determination to open up the economy away from heavy de- pendence on petroleum and oth- er imported items that can be produced in the country. Emefiele went ahead with measures geared at reducing the huge sums spent by the country on import- ing items such as fish and rice, which went as high as N1.3 tril- lion a year.

Available data indicate that the country currently produces about 53.0 million metric tonnes but with a very low average yield of about 7.7 metric tonnes per hect- are, compared with Indonesia’s 23.4 metric tonnes per hectare and 22.2 metric tonnes per hectar in Thailand.

In 2019, 15,569 cassava farm- ers were financed with the sum of N2, 717,709,071 to cultivate over 15,000 hectares of land across 19 States under the Nigeria Cassava Growers’ Association. Similarly, the Bank financed eight proces- sors with the sum of N11 billion to produce the various identified derivatives such as ethanol, starch and sorbitol.

Oil Palm

The desire to restore the Nige- rian oil palm sector to the glory decades of the 1950s and 1960s, when it was the leader in the world oil palm market, prompted the CBN to again partner with stakeholders.

From controlling about 40 per cent of the world market, Nigeria slipped to the fifth position, barely producing three percent of the global supply of oil palm.

That sad narrative appears to be changing now with the inter- vention of the CBN in the sector. The buy-ins from State govern- ments and other top government functionaries has set a partner- ship model that would stimulate investments in the palm oil plan- tations, such that oil palm produc- tion will increase from 1,250,000 metric tonnes to 2,500,000 metric tonnes by 2023.

According to the Governor, the Bank plans to double its production to meet local de- mand by 2023, create jobs and enhance the skills of Ni- gerians along the oil palm value chain.

Tomato

When the Central Bank of Nigeria (CBN), in 2015, unveiled a list of 41 items for which importers could not access foreign exchange from the Nigerian Foreign Exchange Market for, tomato and tomato paste featured prominently on that list.

The policy, which is being implemented in collaboration with the Federal Ministries of Trade and Investment, Agriculture and Rural Devel- opment, Finance, and Water Resources; the Bank of Industry and the National Food and Drugs Administration and Control, aims at boost- ing tomato production, improving the value chain and attracting investment.

The Bank’s efforts have resulted in the mobiliza- tion and validation of about 140,848 farmers from vari- ous Tomato Farmers Associations across 25 States in Nigeria. These farmers are to be financed under the Anchor Borrowers’ Programme (ABP) where they would be linked to proximal proces- sors where applicable, or financed to produce fresh fruits for direct consumption, which constitutes the largest use of tomato in Ni- geria.

Livestock

Borrowing a leaf from the huge successes recorded in the rice, cotton, cassava and

tomato value chains under the Anchor Borrowers’ Programme (ABP), the CBN met with some milk importers, during which the Governor wooed them to take ad- vantage of CBN’s low-interest loans to begin local milk produc- tion instead of relying endlessly on milk imports.

Stakeholders agree that these revolutionary moves to inter- vene in the livestock (dairy) val- ue chain will not only improve cattle management in the country and related violence but will also close the supply gap of 1.2 million metric tonnes of milk. Specifically, it is expected that milk production will increase from 500,000 metric tonnes to 550,000 metric tonnes by January 2021.

As state-of-the-art grazing reserves and ranches begin to take form and shape across different zones in the country, it is expected that these will meet the ever- increasing demand for milk and beef for local consumption. More importantly, the move will ensure the conservation of foreign exchange by reducing the importation of dairy products.

Cocoa

Like oil palm and groundnut, which were major foreign exchange earners in the 1950s and 1960s, Cocoa slipped down the chart on the list of Nigeria’s top crops for export.

The discovery of oil led to the neglect of the farms, leading to a major decline in the produc- tion of cocoa from an average of 420,000 tonnes in the 1960s to about 170,000 tonnes in 1999. Although production rose to over 380,000 tonnes in the period between 2000 and 2010, there was another fall in the figures in 2017 due largely to lack of access to finance, aging cocoa trees, ag-

ing farming population and lim- ited capacity to adopt new technologies.

To help mitigate the challenges in the industry, the bank has ex- tended a total facility of N17.32 billion to projects in the value chain through its various interventions.

The focus of the Bank’s intervention in 2019 was to primarily engage key stakehold- ers and develop a roadmap for the resuscitation of the industry.

The bank has also commenced engagement with relevant commodity associations, state governments, research institutes and financial institutions.

The road- map for stimulating finance to the cocoa industry and ensuring a structural transformation of the value chain is underway and the Bank’s strategy for 2020 is to collaborate with the farmers and promote the use of technol- ogy to enhance the farmers’ productivity.

The value chains of other commodities such as maize, poultry, fish and aquaculture also wit- nessed some degree of intervention by the CBN.

Poultry

For the poultry sector, the aim of the bank is to eliminate the importation of poultry products by 2023 and ensuring the sustain- able domestic supply of eggs and poultry meat across the country.

As part of its strategy in the sector,CBN, in July 2019, played host to select universities in the country to partner with them in a pilot scheme tagged university-based Poultry Revival Pro- gramme aimed at boosting poul- try production in the country through the involvement of universities.

These are: Ahmadu Bello University (ABU), Zaria, Fed- eral University of Agriculture,

Abeokuta (FUNAAB), Rivers State University, Port Harcourt, University of Nigeria, Nsukka; and University of Ilorin.

With support coming from the CBN and the fiscal authorities, it is expected that the intervention in the poultry sector will yield the desired benefits of job creation, food sufficiency, enhanced gov- ernment revenue and support for the Government’s policies such as the ongoing school feeding programme.

Maize

Although Nigeria remains the largest producer of maize in sub-Saharan Africa, churning out about 11 million metric tonnes per annum, the country still has a deficit of about 4.5 million metric tonnes, which are addressed through importation.

All stakeholders agree that importing maize, which is an important cereal in many a Nigerian home, is an abnormal situation, given our vast land and water resources.

Determined to address the demand gap through an increase in maize production, the CBN leveraged its existing relationship with the Maize Association of Nigeria (MAAN) by extending financing to smallholder farmers, in addition to engaging large-scale maize processors without growers’ scheme.

To fast-track self-sufficiency, the apex bank introduced the Maize Aggregation Scheme (MAS). This move is to enable silo concessionaires and feed millers to purchase and preserve locally produced maize from farmers.

With the N8.72 billion ap- proved for the finance of 53,644 farmers under the affiliation of the Maize Association of Nigeria (MAAN) in 2019, it is expected that the cultivated 62,910 hectares across 30 States of the country will yield 188,730 metric tonnes.

The CBN also sought the collaboration of 12 River Ba- sin Development Authorities (RBDAs) on the use of irriga- ble land in their respective areas of operation during the dry farming season.

To build on the foundation laid in 2019, the bank, in 2020 plans to support about 150,000 farmers to cultivate over 400,000 hectares of land with an expected yield of four tonnes per hectare in order to meet the projected production of 1.6 metric tonnes by the end of 2020.

The apex bank, through its Development Finance Depart- ment, will also be partnering universities that have Agricul- tural Faculties to encourage re- search of high yielding seeds for maize.

Fish

With its large bodies of water in the coastal states as well as the two major rivers and their tributaries, coupled with the advancement in aquaculture technology, Nigeria is not expected to have a deficit in fish production. The sad reality, however, is that the country before now had a deficit of 1.9 million metric tonnes of fish. This deficit resulted in a humongous import bill of $1.2 billion.

To address this the CBN, through its various interven- tions, had to extend a facility to the fish value chain amount- ing to N21 billion. These funds were disbursed to 40 companies and 2,950 farmers. Thanks to the interventions, the sector now has an annual increment of 200 met- ric tonnes mainly from aquacul- ture.

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