By Oyetunji Isiaka
Mr. Godwin Emefiele marked three years in office on June 3, 2017, as the helmsman of the nation’s apex bank. Prior to his appointment, there were squabbles between the bank and the fiscal authority, which led to the suspension his predecessor. It was thus a troubled time to be appointed as governor of the bank, more so that, the economy had started showing signs of distress. But he came with a mission.
Giving insight into what would be his mission at the apex bank which he encapsulated in his 10-point agenda, he said the CBN, under his watch, would spend its energies and resources to build a resilient financial system that would serve the growth and development needs of the country using development bank strategies as the fulcrum of his policy to drive the economy.
Not only that, Emefiele committed himself to creating “a central bank that is professional, a central bank that is apolitical, and people-focused and a CBN that would pursue a gradual reduction in interest rates.
In line with this vision, the CBN has pursued with added vigour intervention schemes such as 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), and the Anchor Borrowers’ Programme (ABP), etc.
Piqued by the drain of import bills on the nation’s foreign reserves due largely to collapse of global commodity prices as experienced in 2014, and particularly, the crash in crude oil prices, which went as low as $27 he was of the opinion that, Nigeria cannot continue the way we were used to, thus, the CBN, on June 24, 2015, excluded importers of 41 goods and services from accessing foreign exchange in order to encourage local production of those items.
The CBN hinged its reason for this bold move on the need to among other things, conserve foreign exchange; sustain foreign exchange market stability; ensure the efficient utilization of foreign exchange; ensure that optimum benefit is derived from goods and services imported into the country; and encourage local production of items on the “Not valid for Forex” list.
So far, there has been a boost in the local production of the items on the list of 41, just as substantial foreign exchange has been conserved owing to the reduction in the import bills of the country. Also, industries across various fields of production, have recorded profits in their earnings.
In addition to all these was the battle to stem the avalanche of liquidity surfeit arising from huge campaign expenses of the 2015 general elections, which is characteristic of any election year and the attendant inflationary pressure. Given the transition to a new government, the CBN saw itself playing a critical role in terms of macroeconomic management holding forte for the new government to stabilize.
Thus, the bank unleashed various measures as a way to stabilize the economy. One glaring fact about Emefiele led-CBN was its stubborn disposition and ability to tame the currency speculators prying on the Naira exchange rate by introducing various measures including the ‘managed’ flexible exchange rate regime.
In February 2017, the CBN emerged with a new policy aimed at increasing the availability of foreign exchange in the market and to ease the difficulties encountered by Nigerians, particularly retail end-users, in obtaining funds for foreign exchange transactions for Personal and Business Travel, Medical needs, and School fees, all of which fall under the invisibles category.
It also directed that all retail transactions are to be settled at a rate not exceeding 20 percent above the inter-bank market rate.
Between February and June 2017, the CBN has intervened in the wholesale and retail segments of the forex market with over $5 billion, just as it has re-admitted operators in the Bureau de Change (BDC) segment, which receives $20,000 each for onward sale to low-end users.
Just recently, the CBN also introduced two new FOREX windows: a special forex window for Small and Medium Enterprises (SMEs) to enable SMEs import eligible finished and semi-finished items, and another Forex widow for investors and exporters tagged: “Investors’ & Exporters’ FX Window” and has recorded about $1b deals in the last six weeks.
How well the Bank has done can be assessed by how stable the forex market has been in recent times. At present, this strategy is yielding immense results as both the futures and spot prices are stabilizing.
Analysts and industrialists including the Manufacturers Association of Nigeria (MAN), are now of the view that the CBN is headed in the right direction, while currency speculators have got their fingers burnt. Not minding the current challenges, the CBN had promised to act in good faith with the best available information and in cognizance of current economic conditions pursue the goals of price and financial system stability, as well as catalyze job creation and inclusive growth.
In terms of development financing, the Bank under Emefiele’s watch has continued to act as a financial catalyst in specific sectors of the economy particularly agriculture, in its determination to create jobs on a mass scale, improve local food production, and conserve scarce foreign reserves.
The thrust of Emefiele’s philosophy is ‘produce, add value and export’ (PAVE) in which he has been admonishing Nigerians to return to the farm, produce and buy what is produced in Nigeria as a more sustainable way to ensure economic stability and minimize dependence on oil. What is urgently required as complimentary is a handshake by the fiscal authority to come up with policies to ensure a more enduring and sustainable economic management since monetary policy alone is not enough to sustain macroeconomic development for a long period of time.
In his wisdom, Emefiele believes that this is a more sustainable way of stemming the hemorrhage in our foreign reserves.
If we faithfully keep to the tenets of PAVE, it would ensure increased domestic production to the point of having excess for export which will earn us foreign exchange. It will also stem our taste for foreign goods and help us conserve foreign reserves. In essence, PAVE is synonymous to economic diversification. It is believed that PAVE remains a more sustainable way of not only diversifying the Nigerian productive base away from oil, but more importantly realigning the perception and taste of Nigerians.
Isiaka is an Abuja based journalist
