On Emefiele: If It Ain’t Broke, Don’t Fix It

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On Emefiele: If It Ain’t Broke, Don’t Fix It

On Emefiele: If It Ain’t Broke, Don’t Fix It
April 30
13:35 2019

By Ayo Saheed

 The tenure of the current governor of the Central Bank of Nigeria(CBN), Godwin Emefiele is due to end in a couple of weeks, June 3 to be precise. By then, he would have done five years in office. There is no doubt that it is the prerogative of the president to fill the position following Senate confirmation. Observers are watching whether President Muhammadu Buhari will appoint a replacement or reappoint Emefiele for another term.  But the truth here is that Buhari has a golden opportunity to douse the tension and change the narrative of proven allegations of ethnicity and clannishness that have dogged his administration since he assumed office.

It will not be out of place that some in the president’s orbit are already positioning another northerner for the position. The question is, why fix what is not broken? Godwin Emefiele has no doubt done extremely well against all odds. Few gave him any chance of success but only a very few are in doubt today as to how effective he has been.

We may disagree with some of his policy decisions on the economy but none can fault the patriotic zeal driving his policy motivation. It cannot be overemphasized that the core mandate of the apex bank is monetary policy formulation and regulation, managing inflation trends and protecting the economy from shocks. Emefiele emerged as the CBN governor on the cusp of recession which the economy eventually plunged into. He became the front and centre of the administration’s drive to get the country out of recession and out of the woods.

He steered the bank to take a more nationalist approach, trying very hard to change our attitudes and thirst for foreign products to embrace locally manufactured ones.  In a shrewd move, he denied importers scarce foreign exchange for the importation of 41 items he deemed the nation had no business importing.  Of course this particular action caused widespread anger and consternation domestically and internationally, but Emefiele stood his ground questioning for instance why the nation should provide FX for the importation of an item such as toothpick when it could so easily be produced locally.

Since then, the CBN Governor has not looked back and has intensified his support for activities that would steer the economy on the path of sustainable economic growth.

In the continued recognition of its role as an agent of development and aimed at ensuring self-sufficiency to reduce Nigeria’s excessive dependence on imports, the CBN has in the last five years, invigorated its development finance activities and has maintained a particular focus on supporting farmers, entrepreneurs as well as small and medium scale businesses, through various intervention programmes. Some of these initiatives include the Anchor Borrowers’ Programme (ABP), Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) and the National Collateral Registry.

Also, the CBN introduced the Real Sector Support fund; a facility meant to provide cheap funding at no more than nine per cent interest rate to new projects in the agriculture and manufacturing sectors; all aimed at boosting output and creating jobs.

In the agriculture sector, ABP has ensured that Nigeria emerged from being a net importer of rice to becoming a major producer of rice. In fact, presently, over 900,000 farmers cultivating about 835,239 hectares, across 16 different commodities, had so far benefited from the ABP, which has generated over 2.7 million jobs across the country.

It was in light of the success of the ABP, with regards to cultivation of rice and maize that the Monetary Policy Committee in its meeting last November had recommended that the ABP should be applied to other areas such as palm oil, tomatoes and fisheries to mention but a few.

The CBN recently disclosed that over $500 million was being spent annually on importation of palm oil, which necessitated it to include the produce among items not eligible for forex.

Emefiele, had explained that efforts at supporting small scale farmers and SMEs were based on awareness of the critical role they can play in supporting our economic recovery and growth, as well as in creating job opportunities for millions of Nigerians.

So far, the CBN has through its MSME fund disbursed over N100 billion to the MSME sector, but we still feel a lot can be done. Under the auspices of the Bankers’ Committee, the sum of over N60 billion has so far been set aside under the AGSMIES fund to fund micro, small and medium scale enterprise businesses in the agriculture and manufacturing sectors of our economy.

The CBN recognises that the greatest challenge confronting MSMEs and local farmers is access to credit, and that to unlock the growth potential in our country, these groups must access funding seamlessly.

“In response to this challenge, the CBN will in due course take action that will directly bring banking services to the rural communities through the licencing of a national microfinance bank, which will have a presence in all local governments in Nigeria, thereby supporting the channelling of credit to our rural communities.

“We will continue to explore ways, in partnering with the fiscal authorities, on how we can best provide farmers and SMEs with the support they need to expand their operations,” Emefiele explained.

In all of this, in the last five years, the CBN has also initiated far-reaching reforms in the foreign exchange market in a bid to stabilise the exchange rate.

Apparently impressed by the level of exchange rate stability achieved by the country, the Minister of Information, Alhaji Lai Mohammed, recently said the country’s foreign exchange (forex) policy is working well and is unlikely to be changed anytime soon.

He also commended the efforts of the CBN under Emefiele, in ensuring exchange rate stability as well as sustained reduction in inflation in the country. Mohammed said Emefiele had done a good job, particularly with loans to support sectors such as agriculture. This was how he put it:

“Right now, the currency is converging naturally at about N360 to the dollar. Three years ago, the same was about N525 to a dollar. I don’t think the central bank is in a hurry to change this.

“Inflation is down and the reserves are up. We are in a better position to defend the naira.”

Emefiele recently said the CBN was improving access to credit for underserved Nigerians through the National Collateral Registry and the passage of the Credit Bureau Act.

And under this initiative, small and medium businesses are able to provide valuable assets such as equipment and livestock as collateral in other to access capital from institutions which play an emphasis on assets. And as a result of these initiatives in addition to other reforms by government, Nigeria moved up 24 points in 2017.

“Close to 70 per cent of Nigerians do not have access to financial services, hence the CBN introduced a series of steps to have a financially inclusive society, which include the agent banking guidance and shared network facility, both of which are meant to deepen penetration of agent method in underserved locations across Nigeria,” he added.

The recent launch of the Payment Service Bank in October 2018, was an additional step in leveraging on the agent networks of non-entities such as fast-moving consumer goods, mobile network operators, etc. to underserved communities.

“We are happy because I remember about 18 months ago, Bill Gates mentioned that the level of financial inclusion in Nigeria was 48 per cent and they were concerned that Nigeria was not making progress. We went to work to ensure we meet 2020 target of 80 per cent. As a result of the actions we have taken, our level of financial inclusion as at last week has improved from 48 per cent to 64 per cent in the space of 18 months.

 “I feel more confident that by 2020, we should certainly hit 80 per cent mark we had set for ourselves. In doing this, it is important to look at how we faired as a country during the period of this crisis relative to some other emerging markets”, he concluded.

Market analysts are of the opinion that President Buhari should reflect on all these, and consider reappointing Emefiele for another term to ensure that price stability is sustained as this is very important for businesses, households and financial institutions to make better decisions. This no doubt would also create room for more effective monetary policy transmission, support economic growth as well as ensure that the growing harmony between the monetary and fiscal policy authorities is strengthened.

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