Emefiele: CBN Developing Home-grown Solutions to Tackle Economic Crisis

• Says Nigeria achieving success in local production
• CBN expends billions on agriculture, MSMEs
• Teriba: FG must insulate economy from crude oil volatility

Obinna Chima

Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, Sunday said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.

Speaking on Arise TV, a sister broadcast station of THISDAY, Emefiele said the CBN would intensify its intervention in the foreign exchange (forex) market in order to ensure price stability.

He also disclosed that over the last 10 years, the CBN had invested over N2 trillion in funding agriculture, SMEs and other manufacturers in the agriculture value chain.

In addition, the CBN governor revealed that in the last 10 weeks, over $2.5 billion transactions had been recorded in the Investors and Exporters’ (I&E) forex window, up from the $2.2 billion reported previously.
He insisted that the demand management forex measures of the CBN had worked.

Responding to a question on why the CBN did not adopt the forex model that was adopted by Egypt, Emefiele said: “What we are doing is that we are developing home-grown solutions and I truly would not like to bring down any other country because they are adopting their own solutions.
“A couple of people have said why didn’t we adopt the Egypt model and I said they should leave us to adopt our own solutions and our own Nigerian options because we have our own peculiarities.

“Inflation in Nigeria, the CBN had a target of 6-9 per cent. Unfortunately, it grew to as high as 18 per cent, until we began to reverse it downward and I am hopeful that it is going to go down further.
“Now, compare Nigeria and Egypt. October 2016, Egypt’s inflation was 13 per cent, April 2017; Egypt’s inflation had grown to 31 per cent. I can tell you that at 18 per cent, Nigerians had been complaining that what are these people (CBN) doing.

“It got to 18 per cent and we started to take certain actions to reverse it. So, that would tell you that we are adopting our own home grown solutions and you can see whether it is working or not.”
He said the bank had also done well in shoring up the national currency, explaining that it had improved from N525/$ to around N360/$.

“I am happy that we are doing our best and we are beginning to see home-grown solutions. I believe that with more hard work, Nigeria would get better,” the CBN governor told Arise TV.
He, however, stressed the need for the federal government to continue to implement policies that would help diversify the economy, from heavily relying on oil to agriculture and the real sector.

He said the central bank would continue to support operators in the agriculture, SMEs and manufacturing enterprises through its development finance initiatives, with a view to complementing the federal government’s efforts at diversifying the economy and ensuring that the nation is self-sufficient in food production.

He added: “We have opened the forex market up for more and more people who are interested. That was why we introduced the I & E window. We said if you want forex you can go to that market and buy it once it fits the pricing structure of the goods or whatever you want to do.

“And that has helped to some extent in complementing the flow of forex into the market and has resulted in the appreciation that we have seen. It is the market that determines the direction of the exchange rate.”
When asked about what he feels the actual value of the naira should be? Emefiele said either the Real Effective Exchange Rate (REER) or the Purchasing Power Parity (PPP) models reveal that the exchange rate should be in a range of N280/$1 and N300/$1, but not above N325/$1-N330/.

According to him, the central bank feels gratified to have seen a movement from as high as over N500/$1 and converging heavily southward to its present value.
“All we need to do is to keep monitoring the market and ensuring that if there are certain areas we need to address, we address them. By doing that, we would see more flows into the economy, which would help grow the economy,” he said.

Commenting on the 41 items that were banned from accessing forex from the interbank market, the CBN governor said: “The issue of those 41 items, unfortunately, is one that has been on my table. But I think it is important that in the life of an economy, there is a need for us to take a look and ask ourselves: what really are we importing into this country?

“When this thing started, we said: Why should we import rice? Why should we import toothpick? Why should we import palm oil? At a point in this country, Nigeria was the largest producer and exporter of palm oil and we were controlling 40 per cent of the market share.

“So, there is the need for us to say at this time when there is a scarcity of foreign exchange, it should be set aside for the import of items we cannot produce in this country.”
He said he was satisfied with the outcome of the policy, adding that more time was needed to evaluate its success.
The CBN governor said the policy could be reviewed when it was concluded that local manufacturers of the restricted items had become very competitive.

Emefiele clarified further: “My view would be that if you have forex, you should devote it for the import of items that are important and can’t be produced in the country.
“If you have excess forex, save it or create reserves. My view, which is the view of government, is that there are certain items that we can produce locally.

“But by importing some of these items, you impoverish the people. How can we create jobs for our people by living like that! Donald Trump is the president of the largest economy in the world. When he was campaigning, he said everything must be about America and he takes the interest of Americans first into consideration and by doing that, you create wealth for your people.”

Continuing, he said: “What we did by reversing from producing and exporting crude oil, into importing oil, was that we impoverished those palm oil farmers. What we did by importing rice, when we know that we can produce rice, was that we impoverished the poor rice farmers in Abakaliki, in Kebbi, Sokoto, Katsina and other rice-producing areas.
“We don’t have a choice. God has blessed this country with good soil; good climate and we should not allow these things to waste. We should take advantage of these things.

“I got engaged with some of these people and I said to them: You want us to import fish from you, please tell me, what can you import from Nigeria, and he said nothing. I feel that is not a good answer from a colleague in the financial sector. So, that is the reason why you have to be smart to tell yourself that I can produce it and because I can produce it, I have to produce it and use it to feed my people and save the country foreign exchange.”
He urged policymakers and others in leadership positions to be focused on nation-building as well as improving the well-being of those placed under their care.

According to him, “I grew up seeing this country well. In the 60s and 70s, things were good. But unfortunately, things turned around. What I am saying is that by God placing us in leadership positions today, we have the responsibility to ensure that we work for the good of those people placed under our care.”
He said the government policy on support for local production was gaining ground and attracting the interest of multinational companies who were already investing in rice production.

Emefiele told Arise TV: “We have seen multinationals coming to say they want to join in palm oil production. For instance, go to Cross River State, PZ Wilmar has been cultivating 58,000 hectares of palm plantation; Presco, Okomu are all doing something. So, if a PZ Wilmar needs foreign exchange because there is a little gap, I will not mind giving them because I have seen the interest they have shown cultivating more land.

“We have seen people like Coscharis who hitherto had been in automobile imports, has acquired thousands of hectares of land in Anambra trying to grow rice. We were there last year and this year we would be there again to see what they have done.

“We have seen Aliko Dangote saying he is going to invest in one million metric tonnes of rice per annum. We have also seen states playing their parts also in rice production and we have seen a lot of farmers go into rice production as well, and I call this a revolution.

“With the sustenance of this, I can assure you that Nigeria is on the part of growth and improving the wealth of the people who God has entrusted into their hands to see to their survival.”
He urged foreign investors not to continue sitting on the fence, saying this was the right time to invest in Nigeria, by collaborating with local manufacturers.

The CBN governor said: “My message for investors today is that they should join us. Sometime in 2014, we went to the US-Africa Summit. From the Secretary of Commerce, the Vice-President then and Barack Obama, the message was that this is the time for us to think of what we can do with Africa and not for Africa.

“What that meant was that we need to collaborate. That process of collaboration also meant that we as Nigerians need to fold our sleeves and do it first. So, now that some of us are beginning to show that we can do it, we would like our foreign investor friends to come and join us.

“I am telling our foreign investor friends that now that we have started the vanguard of local production, Nigeria is good for them and I can assure them that they would not be able to find a better place than Nigeria in terms of their returns on investment.”

He reiterated that with the improvement seen in Gross Domestic Product (GDP), barring any other shocks within and outside the economy, the economy would record improved growth before the end of this year.
Also, with inflation trending downward, he anticipated that in no distant time, Nigeria’s inflation would get back to single-digit.

Meanwhile, in a separate interview on Arise TV Sunday, the CEO of Economic Associates, Dr. Ayodele Teriba, noted the build-up of investor confidence in the economy.
He, however, urged the federal government to implement policies that would insulate the economy from the volatility in crude oil prices.

Teriba said: “The first half of 2017 turned out to be the opposite of the first half of 2016. In 2016, the economy deteriorated over the first six months.
“We had the outbreak of recession, we had massive devaluation and we saw inflation rising from below 10 per cent and nearly doubling.

“But in contrast, 2017 has seen the recession abating and the expectation is that in another quarter or so, the economy would be back to growth. We have seen the naira appreciating and we have seen inflation begin to drop. So, it is good news that whereas the first half of 2016 witnessed severe cyclical downturn, the first half of 2017 has seen an upturn which is lifting both investors and consumers confidence.

“Yes, the central bank and other policy agencies have cause to be happy that the measures they have put in place have contributed in part to these improvements that you have seen.”

Nevertheless, he pointed out that the main source of concern about the Nigerian economy happens to be the price of crude, saying much of the Nigerian story revolves around that single variable.
“The deterioration we saw last year was as a result of the collapse in the price of crude oil. Much of the improvement we have seen in the first half of this year was as a result of oil price moving in the opposite direction.

“The key question is now that the oil price is higher than it was last year, is it going to remain high for Nigeria’s recovery to garner the required momentum?
“So, we need policies that would help to insulate the economy from crude oil price movement,” Teriba said.