Perhaps, as a result of the fact that it had to roll out some tough policies to shield the economy from the impact of the coronavirus crisis, the Central Bank of Nigeria (CBN) has, in recent times, come under attack from fifth columnists, who perceive the apex bank’s measures to be detrimental to their selfish interests, JOY LASISI reports
Clearly, by its mandate, the Central Bank of Nigeria (CBN) is empowered to: Ensure monetary and price stability; issue legal tender currency in the country; maintain external reserves to safeguard the international value of the legal tender currency (naira); promote a sound financial system in Nigeria and act as banker, as well as provide economic and financial advice to the Federal Government.
However, like its global counterparts, such as the Federal Reserve Bank of the United States and the Bank of England (BoE), which, have at various times, directly intervened in boosting the fortunes of their economies by injecting funds into different sectors, the CBN has, especially since the 2008/2009 global financial crisis, continually gone beyond its primary roles of ensuring price and financial stability by stepping up its developmental interventions to facilitate the country’s economic growth and development.
Indeed, the CBN Governor, Mr. Godwin Emefiele, has always responded to criticism of the CBN’s developmental role, which is provided for in Section 31 of the CBN Act (2007), by pointing out that the apex bank has no choice than to support real sector activities given the country’s continued dependence on oil and challenges it usually faces whenever the price of the commodity plunges.
Apex bank’s developmental interventions
For instance, in the wake of the banking crisis triggered in the country by the 2008/2009 global financial crisis, the CBN decided to step up its developmental interventions in order to facilitate the nation’s economic growth and development.
The leadership of the apex bank, at the time, reasoned that the banking system would be more protected if the country’s economy was not so vulnerable to oil price volatility.
Similarly, in 2016, the CBN had to intensify its developmental interventions after a sharp drop in oil prices pushed the economy into a recession and led to a weakening of the naira.
In fact, following his appointment for his first term as CBN governor, in June 2014 Emefiele unveiled a 10-point agenda, that, he said, would see the apex bank, under his watch, using its resources to build a resilient financial system that will serve the growth and development needs of the country, adding that the Bank would introduce a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health and oil and gas.
True to his pledge, the CBN, between late 2014 and 2019, vigorously pursued intervention schemes such as the Agricultural Credit Guarantee Scheme (ACGS), Commercial Agriculture Credit Scheme (CACS), the N220billion Micro, Small and Medium Enterprise Development Fund (MSMEDF), Small and Medium Enterprises Credit Guarantee Scheme (SMECGS), the Anchor Borrowers’ Programme (ABP) and the Power and Airline Intervention Fund (PAIF), among others.
Prepared for external shocks
Furthermore, following his reappointment in June last year, Emefiele unveiled a five-point agenda containing measures, which, he said, the CBN, under his leadership and working closely with the fiscal authorities, will implement between 2019 and 2024 to help insulate the nation’s economy from potential shocks in the global economy.
Significantly, at the time he made the aforementioned pledge, the CBN governor had no inkling that the Nigeria will face an external shock as devastating as the coronavirus pandemic.
But, even before the disease began to spread rapidly in the country, the CBN boss had quickly realized that the crisis could present a good opportunity for the country to intensify its export diversification quest.
Speaking with journalists during an interactive session in April, he described the coronavirus crisis as “a golden opportunity for Nigeria to reset.” He said: “As we start a new journey towards industrialization, as the largest economy on the continent, this is an opportunity to get our manufacturing sector to work; to get our banks to work efficiently to support economy growth and development. So that by the time the African Continental Free Trade Area (AFCFTA) comes on stream, Nigeria will be adequately prepared.”
Continuing, the CBN boss said: “The pandemic has led to a significant drop in oil revenue.
This means we have no choice but to diversify the base of our economy. It also means that dollars will not come in the size and quantum that they used to come and that we have to prioritise the allocation of the dollars that available. It also means that we must produce what we can be produced in Nigeria and that we consume what we produce.”
Undoubtedly, but for the several measures and policies rolled out by the CBN Governor and his team, as well as the country’s fiscal authorities, to address the impact of the pandemic, the Nigerian economy would have been neck deep into recession by now as economies even stronger than ours have since buckled under the impact of the COVID-19.
Covid-19 response measures
Some of the measures include, the one-year extension of a moratorium on principal repayments for CBN intervention facilities; strengthening of the apex bank’s Loan to Deposit Ratio (LDR) policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers (Loans given to the private sector, have risen by over 21 percent over the past year); creation of N 50 billion target credit facility for affected households and small and medium enterprises through the NIRSAL Microfinance Bank; creation of a N100 billion intervention fund in loans to pharmaceutical companies and healthcare practitioners intending to expand and strengthen the capacity of healthcare institutions and creation of a research fund, which is designed to support the development of vaccines in Nigeria and a N1 trillion facility in loans to boost local manufacturing and production across critical sectors.
In addition, the CBN granted regulatory forbearance to banks to restructure loans given to sectors that were severally affected by the pandemic and it also mobilized key stakeholders in the economy, which led to the provision of over N23billion in relief materials to affected households, and the setting up of 39 isolation centers across the country.
Commenting on the impact of its Covid-19 response measures in a recent statement, the regulator said: “The effect of these measures which included provision of palliatives to individuals affected by the pandemic, increase in access to credit to critical sectors of the economy that are either high employers of labor or have the ability to create jobs at a fast pace, helped to contain a significant decline in GDP growth in the second quarter of the year.
“Analysts expected GDP growth to decline by 7.4 per cent but the impact of the measures by the monetary and fiscal authorities helped to reduce this decline to 6.1 per cent.
This decline was less severe than the decline experienced in other economies such as the United States, South Africa, and India, which saw significant declines in growth by 32 per cent, 52 per cent and 23 per cent respectively.
We do expect that with the phase out of the lockdown measures, GDP growth in the third quarter will be much better than that of the second quarter, due to the impact of the measures being implemented by the monetary and fiscal authorities.”
Also, commenting specifically on its intervention programmes in the agricultural sector, the CBN disclosed that a total of N38.11 billion has been disbursed as loans to 44,458 beneficiaries through the NIRSAL Microfinance Bank (NMFB), adding that: “This number has risen to N59.12 billion; supporting to 103,189 beneficiaries as of August 2020.”
The apex bank also pointed out that its intervention programmes in the agricultural sector “were a key contributor to the resilience of the agricultural sector during the crisis, as the sector experienced positive growth of 1.6 per cent in the second quarter of the year despite the lockdown.”
It noted that but for the government’s intervention programmes in the agriculture sector, the Nigerian economy could have faced a major food crisis due to disruptions caused by pandemic-induced export restrictions placed on the exports of critical food items, including rice and eggs, by counties such as Vietnam, Cambodia, India, and Thailand.
Recently, the Banking watchdog also unveiled frameworks for the implementation of Family Homes financing initiative, the National Gas Expansion Programme and the Solar Connection Facility as part of efforts to support the Federal Government’s Economic Sustainability Plan (ESP).
Given the foregoing, it is thus surprising that despite the CBN’s efforts, some stakeholders have chosen to turn a blind eye to the progress being made in driving the economy towards growth.
They insist that the CBN should operate within its “core” monetary policy role, when in fact the CBN Act confers on it powers to engage in developmental functions.
Rather than support patriotic moves by the CBN to keep the economy afloat, some of these fifth columnists have taken up commissioned roles in blaming the apex bank for the steps it has taken to shield the Nigerian economy from the global economic shock.
Specifically, in recent times, there have been concerted efforts by these groups to impugn the integrity of the CBN and its top officials, especially because the regulator’s forex policies bar them from having access to forex on the official market to import items that can be produced within the country.
Some members of these groups also ignorantly assume that the CBN will be able to achieve the impossible trinity of maintaining a fixed exchange rate, ensuring free capital movement and guaranteeing an independent monetary policy, something no economy in the modern world has been able to accomplish.
They deliberately choose to forget that there are two sides to managing an economy – the monetary and the fiscal and that the former has borne the burden of both authorities in recent times.
Going by the level of work put in by the CBN and its officials in ensuring the stability of the economy, one is persuaded that they deserve one’s trust and confidence. Thus, instead of criticizing the apex bank, the faultfinders should call on the fiscal authorities to play their role in ensure the economy gets moving again.