It was Raghuram Rajan, former Governor, Bank of India, and professor of finance at Chicago’s Booth School of Business who said that in theory, central banks independence means that monetary policymakers have the freedom to make unpopular but necessary decisions. Interestingly, it was in his efforts to make unpopular but necessary decisions that led to his falling out with Prime Minister Modi and his subsequent resignation from office. This is definitely not the best time to be a central bank governor, as populism seems to be the order of the day in many countries while fiscal policies are missing growth marks. With politicians falling over themselves trying to woo unsuspecting and mostly poorly informed public, central bankers are caught between the rock and a very hard place.
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I do not believe that the Central Bank governor of Nigeria Mr. Godwin Emefiele set out to embrace development central banking, rather circumstances of the country’s transition from one political party to another, and the elongated delay in forming a cabinet by President Buhari in 2015 forced the central bank to overlap into fiscal policy management due to the absence of a finance minister for the first six months of the administration. This equally gave the apex bank the opportunity to venture into areas that were mapped out for intervention under Prof. Charles Soludo who came up with the need for the bank to intervene in the real sector of the economy which watered the ground for what we are seeing today.
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There is a popular saying that when the going gets tough, the tough get going. It is no longer news that things have been tough for the Nigerian economy for sometime, but what is helping to ameliorate the otherwise harsh economic realities on ground is the plethora of development interventions from the Central Bank of Nigeria (CBN) under the leadership of Godwin Emefiele.
The Bank now works closely with the fiscal authorities, through various interventions to catalyze development without prejudice to its core mandate of delivering price and financial system stability.The Bank’s development interventions in virtually all sectors of the economy have greatly impacted growth such that the economy has started recording appreciable growth. Little wonder, the CBN Governor is now seen as a prime development driver in the country.
The Anchor Borrowers Programme (ABP) is one of such interventions. In the past few years, it has improved access to finance for over one million smallholder farmers, who are leading government’s efforts to improve the cultivation of agricultural commodities, such as rice, tomatoes, fish, cotton and palm oil. The ABP has also enabled agro-processors and manufacturers to source their inputs from local sources, rather than relying on the importation of these items.
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Other successful intervention facilities are the Commercial Agricultural Credit Scheme (CACS) and the N300 Billion Real Sector Support Facility (RSSF). These funds are being used to channel single digit interest loans through the Deposit Money Banks and other participating financial institutions to beneficiaries to support improved growth in the agriculture and manufacturing sectors. The effectiveness of these interventions in engendering the growth of local industries has been supported by the Bank’s restrictions of access to foreign exchange on the importation of 43 items that can be produced in Nigeria. Many of such goods are now being produced locally in Nigeria.
Micro, Small and Medium Enterprises (MSMEs), are being given a critical role to play in the growth of the Nigerian economy. As part of efforts to support this objective, the Bank created a N220bn MSME funds, which has been critical in supporting the growth of MSMEs in the agriculture and manufacturing sectors.
Cognisant of the fact that power is fundamental to Nigeria’s economic growth, the Bank established the N213 billion CBN-Nigerian Electricity Market Stabilization Facility in collaboration with the Ministries of Petroleum Resources and Power, the Nigerian Electricity Regulatory Commission (NERC) and the Nigerian National Petroleum Corporation (NNPC). This facility is helping to settle outstanding payment obligations due to market participants, service providers and gas suppliers that accrued during the interim rules period (IRP debts) as well as legacy debts of the Power Holding Company of Nigeria (PHCN). It is the CBN’s way of supporting the Nigerian electricity supply industry (NESI), which is, in turn indispensable for the country’s economic viability and sustainability.
In addition, the CBN established the Nigeria Bulk Electricity Trading (NBET) Payment Assurance Facility, a N701 billion payment guarantee facility to keep power generation companies in production. So far, over 30 per cent of the amount has been disbursed.
To revive Nigeria’s moribund textile industry, the Bank has put in place a N50 Billion Textiles Sector Intervention Facility (TSIF). It is a special mechanism for restructuring existing facilities with provision of further facilities to reactivate companies hitherto closed down due to the harsh business climate.
As a mark of its readiness to support other non-oil growth drivers, the CBN under Emefiele has recognized the need to finance Nollywood, Nigeria’s film industry, which continues to make a strong showing on the global stage. The apex bank is well on the mark with its decision to significantly fund the sector through the Creative Industry Intervention Fund, which would provide loans of up to N500 million to entrepreneurs in the sector.
It is obvious that Emefiele is not yet done. But where he would intervene next may be unveiled by time.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.