CBN’s 100 percent policy as a path to macroeconomic sustainability

Finance

James Emejo writes about the Central Bank of Nigeria’s latest intervention to bolster the non-oil industrial and export sectors that have been crying out for support over the years

It was only recently that the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, officially inaugurated the long-awaited financing initiative aimed at building the country’s industrial capacity by boosting production. At the unveiling of the first round of the recently announced 100 for 100 Policy for Production and Productivity (PPP) initiative, the apex bank presented checks worth N23.20 billion to 28 companies whose projects had been selected for funding.

Emefiele had announced the policy last year under which eligible companies in priority sectors will be selected and 100 companies will be selected to receive CBN funding every 100 days, starting November 1, 2021.

The CBN Governor pointed out that the disbursements, which are loans to be repaid by the beneficiaries, followed the prior review of applications received, adding that the projects, valued at N23.20 billion, include 14 in the manufacturing sector, 12 in the agricultural sector and two in the health sector.

Industrial sector in difficulty

It is clear that all is not for the best in the country’s industrial sector and that all the efforts of the tax authority to revive it have only suffered setbacks. Once considered an economic fortress, the real sector had run out of steam and was arguably in the shadow of itself, beset by various challenges and unable to contribute significantly to growth.

Lack of value-adding capability, continued rejection of products by foreign trading partners due to lack of standards enforcement, and lack of basic infrastructure were still among the major obstacles.

Until recently, when the apex bank had to intervene in critical sectors of the economy, financing remained a huge challenge for industrialization.

Why is CBN bothered?

Although some critics have questioned the rationale for the CBN’s interventions in the economy, given its primary mandate of monetary and price stability, they have failed to recognize the fact that there is no way for the central bank to succeed in its mandate when the real sector, especially the non-oil export segment, which is crucial for foreign exchange earnings, is in a coma.

Notably, the central bank’s interest in supporting the real sector could stem from the fact that the failure of the sector could have a negative impact on the administration of monetary policy.

Today, the country’s foreign exchange crisis is directly linked to weak domestic production attributable to a largely faltering manufacturing sector as well as a struggling non-oil export sector. It is further argued that the most effective way to strengthen the local currency was to boost local exports and exports. But the reverse had been the case.

This is why the apex bank’s resolve to finance manufacturing and strengthen the non-oil export sector to get it back on its feet is not just music to the ears, but a move that should be applauded.

PPP 100 per 100 program

Nonetheless, Emefiele explained that the cardinal objective of the 100 per 100 PPP initiative is to ensure that priority is given to companies that show verifiable progress in import substitution and job creation from the bank.

He explained that for the first batch, 243 applications worth N321.06 billion, spread across key sectors such as agriculture, energy, health, manufacturing and services, were submitted. on the portal – but only 79 applications worth N121.87 billion, were received by the central bank from commercial banks, for projects in six sectors, namely agriculture, energy, health , manufacturing, mining and services. Applications were evaluated based on production efficiency and scalability; local content capability; job creation and human capital development; relevance to the operating sector; and potential contribution to economic growth.

The CBN Governor added that only 28 companies with projects that submitted proposals were ultimately selected for funding.

Emefiele also said that the policy is designed to stimulate investment in Nigeria’s priority sectors with the main objective of boosting production and productivity, which will contribute to efforts to stimulate greater growth in our economy and create employment opportunities.

New FX Bidding Regime

In a bid to boost local production, the CBN Governor also hinted that a new market-driven foreign exchange bidding regime is underway that will support companies that place the highest priority on local production. and job creation.

He said: “We want to ensure that you do business that reduces our imports and reduces your level of imports, reduces your dependence on imported raw materials… These will be the types of businesses that we give priority in currency allocation. cheeky.”

Stimulation of non-oil export activities

The central bank also said it was working with stakeholders to boost non-oil export activities to boost the country’s foreign exchange earnings. This should come as a huge relief to exporters who had continued to groan in a difficult trading environment and brought challenges to the sector to the government’s attention.

According to the head of the apex bank, the initiative aims to generate much-needed export revenue amid uncertainty and vulnerability in oil prices. The idea is to make non-oil exports more attractive to players by providing affordable single-digit financing and ensuring that players who are into processed or refined products are prioritized and supported by the central bank.

Intervention would also dispel complaints from exporters that it was difficult for them to access their export earnings.

He said: “We believe at this stage that as we continue with the import substitution agenda, we should also explore the best way to diversify our currency earning space and we believe that Nigeria with all the opportunities and all the potentials, it is necessary to invite us to look again at boosting exports in Nigeria.

“There are so many products in Nigeria and I mean finished products that end up in different markets in different parts of the world, but unfortunately we are seeing that the companies that produce these goods here in Nigeria are not earning foreign exchange from of these items that are exported out of the country.” Again, we suspect that they may have been exported illegally and that is why these countries are not receiving the exchange revenue.”

He said the plan was to ensure that those who really do export business, especially where there has been value addition to the economy, get government support.

Politics Commendations

CBN’s real sector intervention programs have continued to receive praise from the Federal Government, stakeholders and Nigerians in general.

The Federation Government Secretary, Mr. Boss Mustapha, while congratulating Emefiele, described the policy initiative as well thought out, adding that it would have a significant impact on the economy if implemented well.

On his part, the Minister of Labor and Employment, Dr. Chris Ngige, commended the CBN for boosting economic activities through its various intervention programs. The minister noted that while productivity remained crucial for economic growth, the interventions of the apex bank had been key in realizing President Muhammadu Buhari’s aspiration to lift 100 million Nigerians out of poverty.

The President of the Manufacturers Association of Nigeria (MAN), Mr. Mansur Ahmed, commended the intervention of the CBN, adding that all members would lend their support to the success of the programs. He commended Emefiele for her commitment and determination to tackle the challenges facing the economy.

Ahmed noted that while the oil economy had little impact on the economy, the intervention efforts of the apex bank will bring about a huge economic transformation, adding that the way to reset the economy was to follow the state. mind of the CBN Governor. He also urged his members to take advantage of CBN funding.

He added that MAN was ready to work with the central bank and commercial banks to make this policy a success.

Chairman of the Corps of Banking Chief Executives, Mr. Herbert Wigwe, while praising the efforts of the CBN, said the banks would do everything humanly possible to ensure the success of the policy.

He said the resolution was a further realization that banks cannot survive without customers. He also said that Nigeria should take advantage of the young population to engage them in productive endeavors rather than allowing them to pour their energies into negative activities that harm the economy.

Furthermore, the Managing Director of Harvest Feed and Agro-Processing Limited, Mr. Adedolapo Adeyemi, who is one of the beneficiaries of the 100 percent intervention policy initiative, said the support would increase his production by 60 per cent. and would create about 300 jobs.

While congratulating the CBN on behalf of other beneficiaries, he said the program would be a breakthrough for businesses in the country.

Emefiele, however, called on banks to pay particular attention to small businesses given their ability to create jobs for the large population.

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