CBN’s 100 for 100 Policy as Pathway to Macroeconomic Sustainability

Finance

James Emejo writes on the latest intervention by the Central Bank of Nigeria to strengthen non-oil export and industrial sectors which had been begging for the support over the years

Only recently, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, in matching words with action, formally inaugurated the much-anticipated funding initiative aimed at boosting the country’s industrial capacity by stimulating output production. At the unveiling of the first cycle of the recently announced 100 for 100 Policy for Production and Productivity (PPP) initiative, the apex bank had presented cheques worth N23.20 billion to 28 companies whose projects had been selected for funding.

Emefiele had last year announced the policy under which eligible companies in priority sectors will be screened and 100 companies will be selected to receive funding from the CBN every 100 days, beginning from November 1, 2021.

The CBN governor pointed out that the disbursements, which are loans that must be repaid by the beneficiaries, followed the due screening of the applications received, adding that the projects, valued at N23.20 billion, comprise 14 in the manufacturing sector, 12 in the agricultural sector, and two in the healthcare sector.

Ailing Industrial Sector

There’s no gainsaying the fact that all is not well with the country’s industrial sector and all efforts by the fiscal authority to revive it had only suffered setbacks. Once regarded as an economic fortress, the real sector had lost its steam and was arguably in a shadow of its own, plagued by sundry challenges, and unable to contribute meaningfully to growth.

The lack of capacity for value addition, the incessant products’ rejection by foreign trading partners due to lapses in the enforcement of standards and the dearth of basic infrastructure remained part of the key obstacles.

Until recently, when the apex bank has had to intervene in critical sectors of the economy, funding had remained a huge challenge towards industrialisation.

Why is CBN Bothered?

Even as some critics have questioned the rationale of the CBN’s interventions in the economy, given its primary mandate of monetary and price stability, they failed to acknowledge the fact that there’s no way the central bank could successfully achieve its mandate when the real sector especially non-oil export segment which is crucial for forex earnings, is in comatose.

Notably, the central bank’s interest in supporting the real sector could be derived from the fact that the failure of the sector could negatively impact monetary policy administration.

Today, the foreign exchange crisis faced in the country had been directly linked to the weak domestic output traceable to a largely subdued manufacturing sector as well as a struggling non-oil export sector. It is further argued that the most effective way to strengthen the local currency was to boost local out and export. But the reverse had been the case.

This is the reason why the apex bank’s resolve to fund manufacturing as well as strengthen the non-oil export sector to get it back on its feet is not only music to the ears but a move that should be applauded.

100 for 100 PPP Scheme

Nonetheless, Emefiele explained that the cardinal objective of the 100 for 100 PPP initiative, was to ensure that priority is accorded to companies who display verifiable progress in the bank’s imports substitution and job creation drive.

He explained that for the first batch, 243 applications valued at N321.06 billion, spread over key sectors including agriculture, energy, healthcare, manufacturing, and services sectors were submitted on the portal – but only 79 applications valued at N121.87 billion, were received by the central bank from commercial banks, for projects in six sectors, namely agriculture, energy, healthcare, manufacturing, mining, and services sectors. The applications were assessed based on production efficiency and scalability; local content capacity; job creation and human capital development; operating sector relevance; and potential contribution to economic growth.

The CBN governor added that only 28 companies with projects that have articulated proposals were eventually selected for funding.

Emefiele also said the policy was designed to stimulate investments in Nigeria’s priority sectors with the core objective of boosting production and productivity, which will aid efforts to stimulate greater growth of our economy and create employment opportunities.

New FX Bidding Regime

In furtherance to boost local output, the CBN governor also hinted that a new market-driven foreign exchange bidding regime was underway and would support companies that accord utmost priority for local production and job creation drive.

He said: “We want to see to it that you are conducting business activities that reduce our imports and reduces your level of import, reduces your reliance on raw materials imports…Those will be the kinds of companies we will accord priority in FX allocation going forward.”

Boost for Non-oil Export Activities

The central bank also said it is working with stakeholders to stimulate non-oil export activities to boost foreign exchange earnings in the country. This should come as huge relief to the exporters who had continued to groan under a harsh business environment and had drawn the government’s attention to challenges in the sector.

According to the apex bank boss, the initiative is aimed at generating badly needed export earnings amidst the uncertainty and oil price vulnerability. The idea is to make non-oil export more attractive to players by providing affordable financing at single digit as well as ensuring that operators who are into processed or refined products are accorded priority and supported by the central bank.

The intervention would further lay to rest, exporters’ complaints that it was difficult for them to access their export proceeds.

He said, “We feel at this stage that while we are pursuing the programme on import substitution, we should also explore the best way to diversify our foreign exchange earning space and we think that Nigeria with all the opportunities and potentials, there is need for us to look into export stimulation again in Nigeria.

“There are so many products in Nigeria and I mean finished products that end up in different markets in different parts of the world but unfortunately, we find that those companies that produce those goods here in Nigeria do not earn FX from those items that get exported out of the country. “Again, we suspect that they may have been illegally exported and that is why those countries are not getting the FX revenues.”

He said the plan was to ensure that those who truly conduct export activities, particularly where there has been value-added to the economy, got government support.

Policy Commendations

The CBN’s real sector intervention programmes have continued to receive accolades from the federal government, stakeholders and Nigerians in general.

The Secretary to the Government of the Federation, Mr Boss Mustapha, while commending Emefiele, described the policy initiative as well thought out adding that it would significantly impact the economy if well implemented.

On his part, Minister for Labour and Employment, Dr Chris Ngige, lauded the CBN for spurring economic activities through its various intervention programmes. The minister noted that while productivity remained crucial for economic growth, the apex bank’s interventions had been key in achieving President Muhammadu Buhari’s aspiration to lift 100 million Nigerians out of poverty.

The President of the Manufacturers Association of Nigeria (MAN), Mr. Mansur Ahmed, commended the CBN intervention adding that all members would provide support towards the programmes’ successes. He praised Emefiele for showing commitment and determination towards addressing the challenges facing the economy.

Ahmed noted that while the oil economy had made little impact on the economy, the apex bank’s intervention efforts will achieve huge economic transformation adding that the way to reset the economy was to follow the CBN governor’s mindset. He also urged his members to take advantage of the CBN funding.

He added that MAN was ready to work with the central bank and commercial banks to make the policy a success.

The Chairman of the Body of Bank Chief Executives Officers, Mr. Herbert Wigwe, while commending the CBN efforts said the banks would do everything humanly possible to ensure the success of the policy.

He said the resolution was in a further realisation that banks can’t survive without the customers. He also said Nigeria must take advantage of the youthful population, to commit them to productive ventures rather than allow them to deploy their energies to negative activities which are detrimental to the economy.

Also, Managing Director, Harvest Feed and Agro-Processing Limited, Mr Adedolapo Adeyemi, who is one of the beneficiaries of the intervention 100 for 100 policy initiative said, said the support would boost its production by 60 per cent as well as create about 300 jobs.

While commending the CBN on behalf of other beneficiaries, he said the scheme would be a breakthrough for businesses in the country.

Emefiele, however, appealed to the banks to give special consideration to small businesses given their capacity to create jobs for the teeming population.