Monday 09 April 2018 C002D5556 BUSINESS DAY 23 Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) CBN...protecting local manufacturers and ensuring price stability Since assumption of office, Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) and his team at the apex bank have been working assiduously to protect manufacturers and ensure price stability. He has presided over the CBN at a very challenging period in Nigeria’s history where oil prices, the nation’s major source of revenues and FX suddenly plunged to new lows. In response to the dwindling capital inflows that resulted from lower oil prices, Emefiele introduced a number of measures to ensure that the country does not run out of FX while preventing a significant devaluation of the currency that could fuel runaway inflation. The introduction of the importers and exporters foreign exchange window (I & E) and suspension on importers of 41 items from accessing FX in the official window stood out. Since the introduction of the I&E window, transactions worth over $20bn has gone through the window while the suspended 41 items are estimated to have attracted more than US$10 billion in investments. Also notable is the CBN’s Anchor Borrowers’ Programme (ABP), which has led to a significant boost in local rice production, putting Nigeria on the path to self-sustainability in rice production. Prior to his appointment as the governor, he spent over 26 years in commercial banking culminating in his tenure as Group Managing Director and Chief Executive Officer of Zenith Bank Plc, one of Nigeria’s largest banks with over 7,000 staff, about US$3.2 billion in shareholders’ funds, and subsidiaries in Ghana, Sierra Leone, The Gambia, South Africa, China, and the United Kingdom. Under Emefiele’s leadership, Zenith Bank strengthened its position as a leading financial institution in Africa, winning recognition and endorsement at home and abroad for giant strides in key performance areas like corporate governance, service delivery and deployment of cutting-edge ICT. Before his banking career, he was a lecturer in Finance and Insurance in two Nigerian Universities. Emefiele is an alumnus of Stanford University, Harvard and Wharton Graduate Schools of Business where he took courses in Negotiation, Service Excellence, Critical Thinking, Leading Change and Strategy.
24 BUSINESS DAY C002D5556 Monday 09 April 2018 CBN: Catalysing real sector development The Central Bank of Nigeria (CBN) displayed a rare corporate competence when it deployed extensive policies to redeem Nigeria from the vortex of recession which the nation plunged into following the sudden decline in crude oil prices at the international market. Presiding over the economy at a very challenging time, the CBN interventions into the economy provided the needed impetus for the economy to be out of the woods, writes TELIAT SULE The Nigerian economy has enjoyed a steady growth since the return to democratic governance in 1999. In those intervening years, average GDP growth rate was about 7 percent. Particularly in those years when the crude oil prices were significantly high, the health of the economy was robust particularly when measured in terms of exchange rate stability, considerable external reserves build-up which was as high as $50 billion, single digit inflation and the nation’s attractiveness to the international investing community. At this time, what most other energy dependent nations did was to plough back the excess proceeds from crude oil into the diversification of their economies through the promotion and development of the manufacturing, agroallied and other strategic sectors, with the aim of reducing the vulnerability of their nations to external shocks. Past administrations in Nigeria failed to utilise the opportunity that high crude oil prices offered us. The impact was that when crude oil prices began to fall steeply at the international market, there were no shock absorbers to insulate the Nigerian economy, and in a matter of months, exchange rate began to deteriorate, the three tiers of government were handicapped as revenues dwindled leading to civil workers being owed salaries for months and the development of infrastructure was completely put on hold in a country that ranks poorly in infrastructure development among emerging markets. Consequently, foreign exchange became a scarce commodity about which time it was exchanged at N520/$. For being dependent on raw materials importation, majority of the small and medium enterprises in the country had their capacity utilisation reduced to below average as they could sparsely raise the needed funds to buy forex. Some had to shut down operations when the situation became unbearable. In the aftermath, youth unemployment spiked leading to high rates of crimes, drug trafficking, human trafficking which caused a number of Nigerians to perish in the Mediterranean Seas. The foreign exchange market became fragmented and we had the official rate, black market rate, parallel market rate, Bureau de Change rate, among others. How did the CBN rise to the occasion? Ban on 41 non-essential items Given that Nigerians have penchant for anything imported, at the expense of local substitutes that are even better, Central Bank of Nigeria (CBN) set out to control this unbridled greed, which was causing the nation billions of dollars in foreign exchange. Thus in 2015, the CBN issued a circular: “In the continuing effort to sustain the stability of the foreign exchange market and ensure the efficient utilisation of foreign exchange and the derivation of optimum benefits from goods and services imported into the country, it has become imperative to exclude importers of some goods and services from accessing foreign exchange at the Nigerian foreign exchange markets in order to encourage local production of these items”, the CBN Circular dated June 23, 2015 stated. “For the avoidance of doubt, please note that the importation of these items are not banned, thus importers desirous of importing these items shall do so using their own funds without any recourse to the Nigerian foreign exchange markets”, the circular added. The items are rice, cement, margarine, palm kernel/palm oil and vegetable oils, meat and processed meat products, poultry-chicken, eggs, turkey, private airplanes/jets, Indian incense, Tinned Every year, not less than 100,000 bags of Lake Rice are sold in every festive season in Lagos State, and the periodic sale has run for two consecutive years fish in sauce (Geisha)/Sardines, cold rolled steel sheets, galvanised steel sheets, roofing sheets, wheelbarrows, head pans, metal boxes and containers, enamelware, steel drums, steel pipes, wire rods, iron rods, wire mesh and steel nails. Others are security and razor wire, wood practice boards and panels, wood fibre boards and panels, wooden doors, furniture, toothpicks, glass and glassware, kitchen utensils, tableware, tiles, textiles, woven fabrics, clothes, plastics and rubber products, cellophane wrappers, soap and cosmetics, tomatoes/ tomato pastes, and Eurobond, foreign currency bond/share purchases. Before the CBN was forced to take this step, Nigeria spent about $22 billion importing majorly four items which include rice, wheat, sugar and fish. This nation was world’s number two importer of rice estimated at about N356 billion, while N217 billion and N97 billion was expended importing sugar and fish respectively. Anchor Borrowers Program (ABP) launched The essence of the ABP was to create economic linkage between small-holder farmers and reputable large scale processors with a view to increasing agricultural output and the capacity utilisation of the processor. Topmost on the list of beneficiaries are farmer cooperative groups having between five and twenty members. And the targeted crops are cereals which comprise rice, maize and wheat; roots and tubers prominent among which are cassava, potatoes, yam and ginger; tree crops like oil palm, cocoa and rubber; legumes comprising soybean, sesame seed and cowpea, tomato and livestock (fish, poultry and ruminants). This has led to rice revolution in a number of states particularly Kebbi and Lagos; Ogun, Anambra, Kano, and Ebonyi. The rice revolution in Kebbi and Lagos led to the famous Lake rice, which is the result of partnership between the governments of Lagos and Kebbi States. In Kebbi State where the rice is grown, the provision of improved seedlings through the scheme, farm inputs and extension services have led to higher yield per hectare from 2.5 to about 10 metric tonnes. Rice production involves 16 local government areas, with over 200,000 farmers providing direct and indirect jobs to the local economies of those local government areas. Every year, not less than 100,000 bags of Lake Rice were sold in every festive season in Lagos State, and the periodic sale has run for two consecutive years. Because of the nature of Lagos State as a melting point for all tribes and religions, there are two major festive seasons which are Ileya (Sallah) and Christmas. That means, for the two festive seasons in every year, not less than 200,000 bags of Lake Rice would be sold. Furthermore, the last two years have seen the growth in the capacity utilisation of rice mills in the country. In Kebbi State for instance, Kamba Rice Mill in Dandi Local Government now produces 735 metric tonnes per annum. Labana Rice Mills also produces 250,000 metric tonnes per annum while Wacot Rice Mill presently produces 120,000 metric tonnes annually, but aims to expand capacity to 500,000 metric tonnes per annum. The benefits of the ABP are immediate. Apart from creating over 88,000 millionaires along the Lake Rice value chain; there was a sharp decline in rice importation, thereby saving the nation of the much needed foreign exchange to attend to the needs of manufacturers. The nation’s agric sector accounts for about 25 percent of the gross domestic product (GDP). Overall, it grew by 3.45 percent in 2017. But the growth varies from quarter to quarter. In the first quarter, it grew by 3.39 percent and that moderated to 3.01 percent in the second quarter. The third quarter saw the sector grow by 3.06 while in the last quarter of the year, it grew by 4.23