CBN and economic diversification

Godwin Emefiele

The Nigerian economy, prior to the advent petro-dollar years of the 1970s, was basically agricultural based. Agriculture contributed about 65 per cent to the GDP and represented 70 per cent of total exports. The sector was marked with high labour-absorptive ratio and provided the scarce foreign exchange needed for the importation of raw materials, machine spare-parts and other capital goods required for the few available industries. These suddenly became history with the growing importance of oil, and agriculture was sidelined to the extent that Nigeria could hardly feed her population again from her agricultural activities. The petro-dollar era also brought with it other challenges. Nigeria is today battling with dwindling foreign reserves owing to our huge importation bills, thereby affecting the Naira exchange value.

The scenario painted above was the situation when Godwin Emefiele, the Governor of the Central Bank of Nigeria, assumed office two years ago. Giving an insight into what would be his mission at the apex bank, which he encapsulated in his 10-point agenda, he had said that 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, under his leadership, 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 very recently launched Anchor Borrowers’ Programme (ABP) to mention but few.

The collapse of the global commodity prices as experienced in 2014, and particularly, the crash in crude oil prices, which went as low as $27, did not help matters. And as this was happening, Nigeria still maintained huge import bill that necessitated the CBN’s action restricting 41 items from access to forex from the inter-bank window. This was a major policy plank to curtail the hemorrhage in the nation’s reserves and stabilize the exchange rate of the Naira. The policies and initiatives as expected were not well received by the predatorily western economic interests and vicious speculators which prompted the CBN, at a point to close the rDAS/wDAS FOREX window, among other measures to check further pressure on the exchange rate and also preserve the country’s foreign reserves.

In addition to all these was the battle to stem the avalanche of liquidity surfeit arising from huge campaign expenses of the 2015 general election, which is characteristic of any electioneering 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 Godwin Emefiele led-CBN is its stubborn disposition and ability to tame the currency speculators prying on the Naira exchange rate by introducing various measures including the latest flexible exchange rate regime.

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.

Though the decision to ban 41 items from the inter-bank forex window was greeted with criticism, patriotic Nigerians applauded the policy measure as a giant leap in the right direction aimed at placing Nigeria firmly on the track of sustainable development, nay sound economic ground.

Right from the establishment of ACGS in 1977 through CACS to MSMEDF and the ABP, the CBN has always underscored its determination to support the strategic sectors in order to ensure a strong currency brought about by an active and productive real sector. Knowing full well that the challenge of many farmers and other participants in the real sector is the access to adequate funding, the CBN under Emefiele has provided an enabling environment and made available sufficient Funds that can be accessed by this group of willing actors and entrepreneurs for them to create wealth, generate employment and add value to the Nigerian economy.

The CBN set aside N40 billion out of the N220billion Micro, Small and Medium Enterprise Development Fund (MSMEDF) for farmers at a single-digit interest rate, particularly under the Anchor Borrowers Programme. This essentially was to create economic linkages between 600,000 small farmers and reputable large-scale processors with a view to increasing agricultural output and to significantly improve capacity utilization of integrated mills. The CBN took the bold step to ensure that Nigerian jobs are not exported even as it canvasses a change in the preference of Nigerians for foreign made items we are capable of producing at home.  Indeed, with the resolve of the fiscal and monetary authorities to pursue economic diversification and halt the importation of what can be produced locally, particularly items such as rice, wheat, palm oil, sugar and textile, among others, the CBN intervention programmes would bear the desired fruits.

This done, Nigerians can then look forward with assured optimism that the nation will soon be self-sufficient as it was decades back in her agricultural sector and turn the tide by reducing Nigeria’s import bill by at least 40 percent annually.

A very subtle gospel, being preached by Mr. Godwin Emefiele, which Nigerians need to take seriously, is the philosophy of PAVE (Produce, Add Value and Export.) The concept is about the production of goods and services as well as attitudinal and cultural change of our perception of made in Nigeria products and taste for them. In essence, the tenet of PAVE hinges on ensuring increase in the production of goods and services domestically while also ensuring domestic value addition along the value chain of such products and services in order to make them exportable. For example the shoe maker in Aba should be assisted by making his product’s packaging attractive first to domestic consumers in Nigeria, and secondly to the continental and foreign markets.

PAVE is an effort to make Nigerians change their taste for foreign goods and services. A campaign to mobilize Nigerians, to develop the country’s tourist centers by making them more attractive enough for the citizens to patronize and serve as alternative to people who travel abroad on holidays and stem the drain on the national reserves. We have places like Obudu Cattle in Ranch Cross River State, Yankari Games Village and Resort in Bauchi State, Ikogosi Spring Warm Waters in Ekiti State, and Olumo Rock in Abeokuta, Ogun State, to mention few.

In his wisdom, Emefiele thinks 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.

Abdulkadir Musa writes in from Kebbi State.