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‘Emefielenomics’: Dissecting CBN Governor’s Ambitious Agenda

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‘Emefielenomics’: Dissecting CBN Governor’s Ambitious Agenda

‘Emefielenomics’: Dissecting CBN Governor’s Ambitious Agenda
July 11
16:35 2019

Following his well-deserved reappointment as governor of the Central Bank of Nigeria (CBN), the unassuming Godwin Emefiele, shortly after, unveiled a compelling, proactive five-year plan of action to guide his tenure. LOUIS ACHI dissects the key highlights of the agenda even as seismic geo-political tussles buffet the larger global economic environment

 Reappointed by President Muhammadu Buhari to serve a second five-year tenure, Mr Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN) has emerged the first apex bank boss to serve two terms since the country’s return to democracy, as well as the second such reappointment in the history of the bank.

An unusual elite consensus has graciously conceded that merit persuaded the president’s decision. The president sure deserves some accolades for not allowing himself to be swayed by sentiments on such a critical decision. No doubt the apex bank needs stability and confidence of the investing business community. It was indeed a big relief when news of his appointment streamed in. It signified that this was one decision the President got right.

 A calm, simple family man with even simpler tastes, Emefiele’s persona contrasts sharply with that of his former American peer – the astute economist and ex-Chair of the US Federal Reserve Board Alan Greenspan who held the second-longest tenure in that position behind William McChesney Martin.

Shortly after his reappointment, on May 9, 2019, the CBN governor rolled out the definitive policy direction of his new five-year tenure and promised to expedite access to financial services to 95 per cent eligible Nigerians, by 2024.Typically, Emefiele reviewed the achievements and challenges of the apex bank in his first tenure, noting that with increased consultation and cooperation with the fiscal authorities and other interest groups, the agenda will be realized.

Going forward, the CBN boss stated he aims to work closely with the fiscal authorities to target a double digit growth; bring down inflation to single digit and fast-track the rate of employment.

In his words: First, preserve domestic macroeconomic and financial stability. Second, foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country. Third, continue to work with the Deposit Money Banks to improve access to credit for not only small holder farmers and MSMEs but also consumer credit and mortgage facilities for bank customers. Our intervention support shall also be extended to our youth population who possess entrepreneurship skills in the creative industry.”

According to him, the CBN during the period will encourage the Deposit Money Banks to direct more focus in supporting the education sector, grow the country’s external reserves, and support efforts at diversifying the economy through CBN intervention programmes in the agriculture and manufacturing sectors.

To enhance a crucial macro-economic stability, emphasis now shifts to supporting improved gross domestic product (GDP) growth and greater private sector investment and the apex bank would leverage monetary policy tools in supporting a low inflation environment, while seeking to maintain stability in the exchange rate. Complementing the new footing, decisions by the Monetary Policy Committee on inflation and interest rates would be dependent on insights generated from data on key economic variables.

While prioritizing the sustenance of a positive interest rate regime, monetary policy measures will be geared towards containing inflationary pressure and supporting improved productivity in the agricultural and manufacturing sectors.

Emefiele further clarified that, “Our ultimate objective is to anchor the public’s inflation expectation at single digits in the medium to long run. We believe a low and stable inflationary environment is essential to the growth of our economy because it will help support long term planning by individuals and businesses.”

To reduce the impact continuous volatility in the exchange rate could have on the country’s economy, Emefiele stated the CBN will continue to operate a managed float exchange rate regime and support measures to increase and diversify Nigeria’s exports base and ultimately help in shoring up the country’s foreign reserves.

Affirming Nigeria’s commitment to a free trade regime mutually beneficial but particularly aimed at supporting the country’s domestic industries and creating jobs on a mass scale for Nigerians, the apex bank boss said the CBN intends to aggressively implement its N500 billion financial support facility to boost the growth of the non-oil exports and improve non-oil export earnings.

To achieve Financial System Stability, he said a resilient and stable financial system was imperative for continued growth of the country’s economy given the intermediation role of financial institutions, to support the needs of individuals and businesses.

A very key area in the nation’s push for economic renaissance – the banking sector – was not left out. A critical part of Emefiele’s five-year plan is the recapitalizations of the banking sector.

His words: “In the next five years, we intend to pursue a programme of recapitalising the banking Industry to position Nigerian banks among the top 500 in the world. Banks will therefore be required to maintain higher levels of capital, as well as liquid assets in order to reduce the impact of an economic crisis on the financial system.”

Clearly, in this strategic turf of central banking, the establishment must adroitly read and proactively react to a laundry list of fluid scenarios which include geopolitical and trade tensions that unquestionably impact the global trade dynamics. These strains often generate threats to macro-economic stability and even the monetary policy footing of the nation.

For instance, a combination of factors including financial market volatilities, trade war between the US and key allies, continuing monetary policy normalization by the US, BREXIT, the termination of the European Central Bank’s (ECB) asset purchase programme in December 2018 and the slowdown in the Chinese economy, further heighten uncertainties for the global economy in 2019. Consequently, global growth has been downgraded by the IMF to 3.5 per cent in 2019, from 3.7 per cent in 2018.

 To manage this seismic environment – factoring in rising tendencies and incidences of protectionism, new nationalism and anti-globalization – especially in the western hemisphere requires a bold, well-informed and experienced administrator on duty.

It is to this complex, fluid arena that Emefiele brings over three decades of both theoretical and practical experience from top-flight academic and hands-on banking turfs to. In a change regime, now “Next Level,” Emefiele has admirably deployed governance skills groomed in the stern, high-octane, financial industry, to effectively drive CBN’s command-room.

The new five-year agenda the CBN boss has unveiled targets reining-in the nation’s economic buffeting in a highly volatile and often disruptive global environment. The plan was well received by the business community who has expressed optimism about the economy under Emefiele’s direction.

Even though in its determined effort to manage economic stability, some analysts believe that the CBN has intermittently veered into areas that are not its core mandate. It could be recalled that the CBN’s Anchor Borrowers’ Programme, a financing model for small-holder farmers, is part of the Federal government’s efforts to boost the nation’s rice production, supply, and distribution and consumption value chain.

Significantly however, the Anchor Borrowers’ Programme (APB) has empowered thousands of rice farmers in the country, while working hand-in-hand with the Rice Farmers’ Association of Nigeria (RIFAN) to reach the farmers. The CBN in January 2018 said it is determined to make Nigeria one of the largest rice producers and exporters in the world, making her less dependent on petroleum money.

What’s more – the Director-General, Africa Rice Center, Benin Republic, Dr. Harold Roy-Macauley has acknowledged that Nigeria has overtaken Egypt as the largest rice producer in Africa. The director-general said that Nigeria is now the largest rice producer at 4 million tonnes a year. The latest development is testament to the Federal Government and the CBN’s efforts to vastly improve the production of rice in the country.

According to Roy-Macauley, Egypt was producing 4.3 tonnes annually but production has reduced by almost 40 percent this year, attributed to the Egyptian government decision to limit cultivation to preserve water resources.

To critical industry stakeholders, this unassuming banking sage certainly deserves kudos for keeping faith and demonstrating uncommon commitment and professionalism in a particularly challenging period of the national journey. Governor Emefiele’s track record of unambiguous performance at the nation’s apex bank stands him out as the right horse to back in the high intensity apex finance sector.

 Many were however surprised when the conservative President Buhari backed this quietly focused, high-performance horse at the CBN. It could be validly said that with his silence then, Buhari simply left his detractors in a guessing game but his action proves to be the right one.

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