Tinkering jigsaw economy in five-year battle

It’s been a bumpy ride for the economy, starting from the tail end of 2014, but also, heavily laden on the hands that have been steering the clogged wheels of growth, especially with lopsided functions that spread beyond primary mandates. This is simply about the trajectory, travails and trudging of the Central Bank of Nigeria. How about the triumph?

After the global financial crisis in 2008, central banks across the globe re-invented their policy basket, which saw the emergence of a renewed vigour in unconventional monetary policy. This was in efforts to forestall further economic misfortunes and possibly, augment assessed fiscal policy lapses, which were capable of sustaining or restarting the crisis.

The nation’s dependence on crude oil and its related products; the sustained mismanagement of the proceeds; neglect of the infrastructure stock; and lip service to diversification, which turned mere mantra over the years, renewed a fresh crisis for the country from 2014, but has crystalised in the last four years.Unfortunately, Godwin Emefiele, emerged the monetary policy czar that was cut in the crossfire. He never saw the windfall, but the whirlwind of commodity volatility and the attendant fiscal crisis. It’s a five-year episode by June this year.

Addressing a world press conference at CBN Headquarters in Abuja, after his appointment in 2014, Emefiele promised that his administration would create a people-centered central bank and ensure financial system stability.He said: “We must, by now, have been tired of hearing people talk about the ‘potentials’ of Nigeria. Now is the time to live that dream. I truly believe that working together, we can achieve our goals and give Nigerians the chance to live longer, better and more fulfilled lives.”He equally promised to maintain exchange rate stability and macroeconomic stability. On monetary policy, he added: “We shall pursue a gradual reduction in interest rates.”

While this has remained challenge, with the benchmark interest maintained at 14 per cent for more than two years, the leadership of the bank has devised development financing as a strategic tool to intervene in the critical areas of the real sector at single digit interest rate.

Of course, at the peak of the ongoing economic challenges, the apex bank have used a mix of conventional and unconventional policies to stabilise the economy to the amazement of the global community. While stepping up policy choices in monetary policy to stem rising distortions to price stability (inflation), it also assumed the roles in fiscal management at various times, using development interventions to stimulate the real sector to take up production of the “usual” imported items.

Interventions
The latest of the bank’s intervention to ease access to finance in the midst of economic challenges and assessed high risk environment, is the emergence of N5billion capitalised NIRSAL Microfinance Bank.The microfinance bank, as the brainchild of the Bankers’ Committee, which Emefiele is sitting atop its management, was set up in collaboration with Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and the Nigerian Postal Service (NIPOST). The bank will give out loans at a five per cent interest rate and customers will have a two-year moratorium and five years for repayment.

The bank will tackle the challenge of access to credit for SMEs, with loans available at rates below the inflation rate and monetary policy rate. This to a great extent implies that the beneficiaries will be enjoying a subsidy. It is also expected that the conditions and terms of the credit will be easier to fulfil by the SMEs than the requirements of the conventional money deposit banks.

Before now, the bank has revived the Real Sector Support Fund (RSSF), as part of rescue strategies for the real sector, clearly marking activities that would be covered under the programme, including Greenfield (new) and expansion of (Brownfield) projects in manufacturing, agriculture and other related sectors.

“The new guidelines stressed that priority would be accorded projects with high local content, import substitution, foreign exchange earnings and potential for job creation, while maximum facility shall be N10 billion per project. Facilities are to be administered at an all-in interest rate/charge of nine per cent per annum,” CBN’s Director of Banking Supervision, Ahmed Abdullahi, noted.

The Lead Director of CSJ, Eze Onyekpere, said: “The fact that SMEs will access credit without necessarily providing a collateral as the business itself can act as collateral and will be registered in the National Collateral Registry as security for the loan, is a wonderful innovation.

“This development seeks to implement the Secured Transactions in Movable Assets Act (No.3 of 2017) with the objectives, inter alia, of enhancing financial inclusion, stimulate responsible lending to micro, small and medium sized enterprises and establish and functionalise a National Collateral Registry.

“The recognition of securities, which the conventional money deposit banks have rejected as collateral is a welcome development, a step in the right direction. This should be deepened to support entrepreneurship and the blossoming of creative ideas. “The initiative will therefore, increase value addition, create new jobs as the SMEs will have access to credit to expand and deepen production.”

Financial Inclusion
Cognisant of the fact that close to 40 per cent of adult Nigerians do not have access to financial services, CBN implemented series of initiatives to drive efforts aimed at building a more financially inclusive society.The agent banking and Shared Agent Network Facility (SANEF) are intended to deepen penetration of agent networks in underserved locations across the country. This initiative is currently driving inclusion, with the country moving close to 60 per cent presently and expected to hit the 80 per cent target in the next 20 months.

The recent unveiling of the policy on Payment Service Banks was also an additional step aimed at leveraging on the distribution networks of non-bank entities, such as Fast-Moving Consumer Goods companies, Fintechs, and Mobile Network Operators, in providing financial services to underserved communities.In pursuant of the mandate of the Central Bank of Nigeria (CBN) on sustainable economic, inclusive growth and financial inclusion, the apex bank, in collaboration with the International Finance Corporation (IFC) established National Collateral Registry (NCR).

The NCR is a financial infrastructure that seeks to deepen credit delivery to MSMEs through enhanced acceptability of movable assets (equipment, machinery, vehicles, Keke-NAPEP, crops, livestock, account receivables, inventories, jewelries) as collateral for loans by financial institutions.In about a year of legislating the ‘Secured Transactions in Moveable Assets (STMA) Act, no fewer than 154,827 operators Micro Small and Medium Enterprises (MSMEs) have used their movable assets to obtain loans from financial institutions, under NCR, estimated at about N1.21 trillion.

Out of the number, 22,251 were female-owned MSMEs, even as a number of borrowers secured credit in 2017 with their movable items, a development that has been attributed to the high participation of smallholder farmers under the CBN Anchor Borrower’s Programme, using cross-guarantee as collateral.Out of the total loan portfolio, N43.62 billion went to female-owned MSMEs.

Forex Policy
From 41 items on the prohibition list to 43 presently, tagged “capital control”, the policy, which attracted huge criticisms at its inception, has returned some gains in the economy that helped in surmounting the foreign exchange and fiscal crisis, with several accolades.

Today, the exchange rate has become predictable at the mass segment. The popular independent segment – Investors and Exporters’ Window, initiated by the CBN, enthroned game changing standards, as investors willingly transact and establish value-driven deals there. The inflows at the window have also boosted reserves accretion.For Emefiele, it’s a dogged implementation of the bank’s policy that restricted importers of certain items from access to foreign exchange at the official window. “It has led to improvements in the domestic production of those items and a reduction in Nigeria’s import bill.”

From an average of about $5.5 billion, the nation’s monthly import bill fell consistently to $2.1 billion in 2016 and $1.9 billion by half year 2017. The numbers have continued to be better today.Psaltry International Limited (PIL), an agro-allied company based in Oyo State, by the introduction of the policy, had its fortunes reversed in the starch-producing sub-sector. Prior to the policy, Psaltry had only few customers and a huge backlog of inventory. Today, the company now has over 50 multinational clients, including Nestle and Unilever, thereby saving Nigeria more than $7 million in foreign exchange drawdown.

The access restriction policy freed Nigeria from the perennially embarrassing importation of “ordinary” toothpicks. Unilever, which moved its production facility to another country a few years ago, has re-commissioned a new Blue Band Factory in Agbara, Ogun State.
There are significant gains in foreign exchange that would have been drawn down due to the importation of rice. As at 2016, just one full year of implementation of the policy, rice exports to Nigeria had fallen significantly to 784 metric tonnes. “These are clearly verifiable successes of the policy’s attempt to create jobs locally, improve the wealth of our rural population, improve industrial capacities and ultimately attain economic growth in Nigeria,” Emefiele said.