As CBN sends strong signal to economic saboteurs

Governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele, while delivering the annual lecture of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos recently , gave clue to the business community on what to expect from the regulatory environment next year. KELECHI MGBOJI in this report examines direct implications for economic saboteurs and Small and Medium scale Enterprise (SMEs), especially as it affects Agriculture.

IN like manner, the Executive Director, Bank of Agriculture, Mr. Niyi Akenzua, recently said  the Bank of Agriculture was working in collaboration with the CBN to boost rice production in Nigeria, adding that the efforts made in local production of rice has saved Nigeria about $800 million in foreign exchange.

Between President Buhari and Bishop Oyedepo

He said Nigeria would cease to import rice by the end of 2019 because it would be able to meet local demand of rice before the end of the next year.

These strong declarations sends strong signal that stepping into the new year, it is not going to be business as usual for banks, companies and individuals behind activities aimed at undermining the CBN’s extant policy on the 41 items banned from accessing foreign exchange at the official window. Intact, this lender of last resort has  declared such activities as well as currency speculation as economic sabotage.

For the CBN, beside the immediate prosecution, which is being finalized in collaboration with the Economic and Financial Crimes Commission (EFCC), culprits would not be banked by any other financial institution in the country for unspecified period of time.

The CBN’s stance rides on the premise that sustenance is necessary now, given the successes in terms of increased domestic production, that have been recorded so far on 41 items.

He said: “The remarkable success that has been achieved in stimulating domestic production of goods such as rice, cassava and maize, as a result of the restrictions placed by the CBN on access to forex for 41 items, the CBN intends to vigorously ensure that this policy remains in place.”

The warning also goes to dealers in foreign exchange who capitalize on policy loopholes to gain undue advantage and indulge in currency speculations.

Support for the SMEs

Emefiele said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.For instance, over the last 10 years, the CBN had invested over N2 trillion in funding agriculture, Small and Medium scale Enterprises (SMEs) and other manufacturers in the value chain.

The regulator said the apex bank would continue to support operators in the agriculture, SMEs and manufacturing enterprises through its development finance initiatives, with a view to complementing the Federal Government’s efforts at diversifying the economy and ensuring that the nation is self-sufficient in food production.

Speaking further, Emefiele said: “The issue of those 41 items, unfortunately, is one that has been on my table. But I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country? When this thing started, we said: Why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share”.

For the CBN Deputy Governor, Corporate Services, Edward Lamtek Adamu, in his personal note, said the corrective actions by the apex bank have put key banking industry indicators at the path of recovery.

Why policy must not be sabotaged

There has been considerable discourse particularly on whether the restriction is driving local production. Some nay-sayers believe that it has constrained productivity and growth in the economy.

But Emefiele revealed that based on CBN’s internal research,  there is strong support that the recovery of Nigeria’s economy from the recession may have been much weaker or even negative, without the implementation of the restriction on   41   items.

His words:  “Our research supports the conclusion that the combination of the restriction on 41 items along with other measures imposed by the fiscal and monetary authorities has helped to promote economic recovery.

“Any attempt to reverse the course of this actions may have untold consequences on the growth trajectory of our economy particularly in our push to diversify and restructure our economy.”

He observed that recommendations are being made to the CBN that the list of 41 items be expanded to include other additional items that can be locally produced. The development is a tacit signal that the end to the controversial ban on  41 items, which took effect since 2015, is not in sight.

The consensus opinion among some industry stakeholders is that the CBN’s restriction of 41 items was one of such policies that have also boosted forex stability.

More than two years after the policy shift, its objectives such as encouraging local production of the affected items and boosting local industries suffocated by the importation of competing products are being realized. The policy implementation was part of the home-grown solutions introduced by Emefiele to sustain forex market stability and ensure the efficient utilization of available forex to grow critical segments of the economy.

The policy implies that those who import these items can no longer buy foreign currency from the official window to pay overseas’ suppliers. Rather, they will have to source forex from the parallel market or BDCs to pay for their imports.

Job creation

Many entrepreneurs are taking advantage of the 41 items policy to venture into the domestic production of the restricted items with remarkable successes and great positive impact on employment.

According to Emefiele, the dramatic decline in our import bill and the increase in domestic production of these items attest to the efficacy of this policy. Noticeable declines were steadily recorded in our monthly food import bill from US$665.4 million in January 2015 to US$160.4 million as at October 2018; a cumulative fall of 75.9 per cent and an implied savings of over US$21 billion on food imports alone over that period.

The  Central Bank today according to the governor, is more committed to creating wealth and putting in place strong policies for creating jobs for Nigeria’s growing youth population.

In  my  inaugural  address  to  Nigerians  after assuming  office  as  the  Governor  of  the  Central Bank of Nigeria in June 2014, I indicated that my mandate would be to ensure that the Central Bank of Nigeria is more people focused, as its policies and programs would be geared towards supporting job  creation  and  fostering  inclusive  growth,  in addition to key macroeconomic concerns such as inflation and exchange rate stability. This idea of a people focused central bank is more relevant today, given the global headwinds we face as a nation and the  Central Bank of Nigeria remains committed to supporting measures that would wean the nation from its dependence on imported goods.

Challenges

But analysts point out that even if the CBN succeeds in making affordable credit easily accessible for SMEs, the banking watchdog would have to address the issue of some of the small firms not being properly structured to repay loans.

For instance, at a recent conference in Lagos, the Senior Manager, Development Finance Department of CBN, Chinedu Zephaniah, lamented that poor business structure and weak financial system has made it difficult for financial institutions to support SMEs.

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