Analysing CBN’s Fixation on Agriculture

Finance

James Emejo writes on the sustained commitment of the Central Bank of Nigeria towards developing the agricultural sector

In 2015, the CBN stirred the hornet’s nest when it cut off 41 imported goods and services from accessing the official foreign exchange window. The banned items cut across agriculture, manufacturing, pharmaceutical, aviation, and construction among others. Subsequently, fresh items including cotton, rice, and tomatoes were added to the list.

This move was part of efforts by the apex bank under the leadership of Mr. Godwin Emefiele, to among other things reduce the undue pressure on foreign exchange and stimulate local production of goods and services that the country could manufacture.

Not a few questioned the rationale for the central bank’s incursion into agriculture and other critical sectors of the economy rather than restrict itself to monetary policy mandates. However, the fact that the success or effectiveness of monetary policy also depended on happenings in the general economy leaves much to be desired.

For instance, to strengthen the value of the Naira, experts believed that the country must boost local output and export to earn foreign exchange rather than continue to rely on imports which put a strain on foreign reserves. It can, therefore, be argued that all CBN’s special intervention programmes are well thought out and in the interest of the economy. The CBN’s move to restrict access to forex for certain items is in line with President Muhammadu Buhari’s mantra that Nigerians eat what they produce and produce what they eat.

Notwithstanding, the development sent jilters across sections of the economy as the bigwigs who fed fat on massive importation at the detriment of the economy kicked against Emefiele’s policy direction.

At a period when the economy was at the mercy of global oil price as well as the eternal reserves under pressure, the CBN governor, knowing that the pattern of importation was unsustainable in the long run, stuck to his guns and carried on with the policy which has today vindicated him.

Anchor Borrower Programme

Following the ban of items from official forex, the CBN also launched the Anchor Borrowers Programme (ABP), which had so far proven to be one of the most successful agricultural intervention programs by the government to date.

Of particular reference is the revolution in local rice production which had seen the country drastically slash its food import bill. The ABP had also brought an unprecedented revolution in wheat production, tomato, and cotton among other improvements in the agricultural value chain.

Today, Emefiele is held in high esteem because of its vision and passion for the Nigerian economy.

Many Nigerians had wondered what the fate of the country would have been if the economy was still highly dependent on the importation of food to meet local consumption during the COVID-19 pandemic when countries shut their border to contain the scourge. At that time, the ABP was already up and doing while the country had grown enough grains to meet local demands.

Massive Impact on Agriculture

As rightly alluded to by the CBN governor recently, restriction of foreign exchange access to 41 import items had been in the national interest and had helped to save the economy from collapse. He also reaffirmed that agriculture remained a strong pillar and saving grace for the Nigerian economy.

Emefiele, who expressed satisfaction over the level of interest shown in agriculture and the tremendous impacts recorded in the last six years, further wondered how the country would have coped with the rising prices of food and commodity items across the world – especially the current distortion in global supply chain occasioned by the Russian -Ukrainian war – without the foresight to revamp agriculture.

The CBN governor, after an inspection tour of the palm plantation at Odighi Village in Ovia North East Local Government Area of Edo State recently said the Central Bank had assumed a pivotal role since 2015  when President Muhammadu Buhari had directed that “we produce what we eat and eat what we produce” by coming up with several initiatives aimed towards repositioning the sector to create employment opportunities as well as grow the Gross Domestic Product (GDP) of the country.

A visibly elated Emefiele, shortly after his assessment of the farm attested to the giant strides already being recorded in the production of maize and cassava and expressed optimism that in the next 12 months, palm produce harvests would have commenced following the apex bank’s intervention in the sector.

Remarkable Impact in Rice 

No doubt, the unprecedented revolution in local rice production has had an invaluable impact on the economy. According to Emefiele, following the successes recorded in the implementation of the ABP, the country had been able to significantly reduce rice importation from Thailand by over 99.83 per cent within the past seven years.

Emefiele, at the unveiling of the mega rice pyramids in Abuja recently added that rice imports from Thailand alone were valued at 1.3 million metric tons as of  2014,  adding that by 2016, importation from the same country had fallen to only 58,000 metric tons. 

The CBN governor further disclosed that as of the end of 2021, Thailand only exported 2,160 metric tons to Nigeria, thereby saving the latter foreign exchange and helping preserve local jobs. Among other achievements, he said the ABP was launched in 2015 to curtail excessive imports adding that “we have seen incremental reductions in rice imports from Thailand”. 

Cotton

The apex bank’s intervention in the Cotton, Textile, and Garment (CTG) sector had been unprecedented. Emefiele, last year said the revival of the economy remained crucial for strengthening economic recovery, boosting employment and wealth for Nigerians.

According to him, the apex bank’s intervention in the sector had led to the creation of 620,000 direct and indirect jobs since the efforts to reposition the sector began in 2019, has disbursed a total of N44 billion between 2019 and 2020 across the CTG value chain while monitoring recovery over the period.  

Further listing the gains from its intervention programme in the sector, Emefiele said nine ginneries had been resuscitated while cotton had been ginned all-year-round for the first time in 10 years.

At a meeting with critical stakeholders in the CTG sector, the CBN governor also disclosed that over 278,500 hectares were financed by the apex bank in 2019 and 2020 adding that over 90,000 Metric Tons (MT) of cotton seed was harvested while the industry capacity of ginneries increased from an average of 19 per cent to 51 per cent.

He said the textile sector got 100 per cent of their major raw materials (cotton lint) at a CBN- subsidised rate of N440,000 as against the market price of N593,000 adding that the industry had an increase in production of over 10 million meters of yarn materials.

Testimonial

The President, National Cotton Association of Nigeria (NACOTAN), Mr. Anibe Achimugu, while attesting to the revival of the textile sector, brought about by the CBN commended Emefiele’s commitment towards repositioning the sector.

In an interview with THISDAY, he said, “Before we came on board in 2019 as it were, Nigeria was producing about 80,000 metric tons of seed cotton but in 2019, we produced 123,000 metric tons; in 2020, it went up to 132,000 metric tons.

“On average, Nigeria is now producing about 150,000 metric tons of seed cotton. And before we started in 2019, there were only about five ginneries that were fully active but as we speak today, we have about 23 ginning companies that are active today.

“It is a lot more difficult to revive the textile companies because it has to be sustainable after years of rot. But the determination of the CBN to support the CTG sector is there and the administration of President Muhammadu Buhari is also interested in the revival of the textile sector.”

It is also on note that state governors, the All Farmers Association of Nigeria (AFAN), under which all commodities associations belong, have all commended the resolute commitment and vision of the CBN government to reset the economy and reduce its exposure to external shocks.

CBN’s Policy Thrust

It is however noteworthy that the apex bank’s five-year policy thrust (2019 to 2024) is driven by the need to support continued growth and development of the Nigerian Economy to achieve better macroeconomic indices amidst inflation, unemployment, and foreign exchange concerns

Emefiele said, “The CBN will remain committed to fulfilling its mandated objectives of price and exchange rate stability. We will continue to work to safeguard the stability of our financial system while supporting the development of a payment system infrastructure that will improve access to credit for all eligible Nigerians.

“Nevertheless, additional emphasis will be placed on supporting greater growth of our economy and in reducing unemployment, through targeted interventions in the agricultural and manufacturing sectors.”