Emefiele Replies IMF, Says CBN Credit Expansion Programme in Order

James Emejo

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, has said its credit intervention programme has helped to stimulate consumption and growth as well as boosted Gross Domestic Product (GDP).

He said the bank’s credit expansion drive had also stimulated the manufacturing sector and shielded businesses and households from the negative impact of the COVID-19 pandemic and other external vulnerabilities.

Emefiele was reacting to the recent call by the International Monetary Fund (IMF) through its 2021 Article IV Consultation Report, that the CBN should consider scaling down its credit expansion programme as this was likely to cause market distortions in the long run.

But, the CBN governor argued that the central bank as a development finance institution has a responsibility to support the economy especially in difficult times.

Emefiele at the just concluded Monetary Policy Committee (MPC) meeting, had also announced that the committee had further urged the central bank to redouble its developmental finance initiatives aimed at boosting domestic food output which would help in moderating food inflation going forward, thereby moderating headline inflation.

He said, “The truth is that the IMF I have to admit has being a great supporter and adviser to the CBN and to Nigeria. In terms of advise, I think it is important that we reiterate the fact that CBN remain development finance oriented central bank and it is very normal for a developing economy to deploy development finance tools through interventions to support the growth of the economy. Let’s not forget that about two years ago, monetary policy said that our new thrust would be price and monetary stability that is conducive to growth.

“If we are to adopt price and monetary stability that is conducive to growth in an environment where there is a tight fiscal space, where revenue shortfalls abound and even government has to borrow, then I think it is just reasonable that central bank should step in to support the fiscal to fill that space and not through grants but through loans to our smallholder farmers, to our small and medium enterprises, through loans to our households, to wake up our manufacturing industries that are dead.”

Contiuing, Emefiele said, “And I can say that in the last two and a half years, we have done certainly more than N3 trillion. Whether we like it or not, and IMF themselves agree that whereas over N300 billion that we have disbursed to almost one million households helped to catalyse consumption expenditure that has helped Nigeria to turn positive in its GDP even though GDP is still fragile and we still face vulnerabilities.

“IMF knows that even our interventions to the manufacturing sector are helping and we have facts to show so. Aside from the Anchor Borrowers Programme in agriculture, last month we went to Sokoto to launch a three million tons cement factory to increase manufacturing output in cement. And Mr. president would be going to lagos to commission $2.5 billon fertilizer plant.

“What would that do for us? The $2.5 billion fertilizer plant will result in additional three million tons of urea in the country. Indorama produces three million metric tons, Notore produces 500,000 and that is 6.5 million metric tons per annum.

“Our annual consumption is one million metric tons. What does that mean? They would export. We would earn foreign exchange that would create liquidity in our I&E window and lead to less reliance on central bank for FX. Yes, it is an advise from IMF which we would take but at this time we are in a development finance mode where we must grow our economy while at the same time, we are doing everything possible to make sure our mandate of monetary and price stability still remains sacrosanct.”