CBN Adopts Measures to Mitigate Looming Food Crisis

* FX demand management policy has stabilised naira, says Emefiele
Eromosele Abiodun,  James Emejo and Nume Ekeghe in Akure and John Shiklam in Kaduna

The Central Bank of Nigeria (CBN) said it has adopted measures to mitigate the impending food crisis occasioned by the crisis in Russia and Ukraine.

Governor of the CBN, Dr. Godwin Emefiele disclosed this in Kaduna, yesterday, during the unveiling of the second maize pyramids under the CBN/Maize Association of Nigeria (MAAN) Anchor Borrowers’ Programme (ABP).

Also yesterday, Emefiele said the bank’s foreign exchange (FX) demand management policy had stabilised the naira at the Investors and Exporters (I&E) Window.

Speaking further in Kaduna, Emefiele said the volume of maize pyramids in Kaduna was intended to serve as stock for the Strategic Maize Reserve (SMR) to be released immediately to major millers.
Emefiele who was represented by CBN Director, Development Finance Department, Mr. Philip Yila Yusuf, said the apex bank was committed to financing 600,000 hectres as the farming season approaches.

He explained: “Our strategy is hinged on improving productivity by providing more funding for the anchors to enable them to utilise high quality inputs and good agronomic practices to boost output.
“Bringing recent happenings globally into perspective, two of the top ten exporters of maize (Argentina and Brazil) experienced droughts in 2021, while another two (Ukraine and Russia) are at war.

“This will certainly impact on maize supply globally and drive prices northwards. Consequently, we have planned a more robust and timely wet season to commence in April 2022 for maize and other key commodities like rice, wheat, cassava, sorghum and soyabeans to mitigate the impending food crisis occasioned by the crisis in Russia and Ukraine”.

Emefiele said prior to the CBN’s initiation of the maize revolution under the ABP, growth of maize production in Nigeria used to be largely due to the increase in hectares of cultivated land and not yields per hectares.

He said: “The yield prior to 2016/2017 in Nigeria was as low as 1.8MT/Ha, considered as the lowest among the top 10 maize producers in Africa, behind countries such as Egypt and South Africa where the yields are 7.7 MT/Ha and 5.3MT/Ha, respectively.”
The CBN governor explained further that, this low yield resulted in the country’s inability to meet the domestic and industrial maize demand.

He said in order to address the challenge of low yield, the apex bank had developed a framework for the participation of some seed companies in the 2021 wet season farming under the ABP to produce hybrid seeds that would guarantee high yield for farmers.

Emefiele said further that the CBN was partnering with Flour Mills in Nigeria and technical experts to introduce Good Agronomic Practices (GAP) through practical farm demonstration to farmers and extension workers, aimed at improving the yield of maize per hectare from an average of 2.5 tonnes per hectare to six tonnes per hectare.

“It is gratifying to note that the nation’s maize production as at date, is 12.2 million metric tonnes from 10.5 million metric tonnes in 2015 when the anchor borrowers’ programme commenced.
“This increased production is taken from the farmers as repayment for the loans and put in a strategic maize reserve.

“The Strategic Maize Reserve (SMR) which was established in December 2020 as a short-term measure pending the revitalisation of the Nigeria Commodity Exchange is meant to moderate the price of maize in the country through strategic and phased releases to millers and poultry farmers.
“This was in line with the Banks’ mandate of ensuring price stability and sustainable supply of maize to high demand industries,” the CBN governor said.

He said the CBN remained committed to the growth and development of the Nigerian economy. This, according to him could be attested to by the numerous development finance interventions deployed to reduce the negative effect of the COVID-19 pandemic on businesses and households.
Also speaking the President of MAAN, Dr. Abubakar Bello, thank the CBN governor for providing the enabling environment for smallholder farmers.

He said the event demonstrated the capacity of MAAN in mobilising Nigerian farmers to produce, “what can sustain us and even export over a period of time.”

He said the official unveiling of the pyramids was a genuine feedback to the present administration’s determination to lift many Nigerians out of extreme poverty and position agriculture as a business.
“There are 21 pyramids each constructed with between 30 – 79 trucks of maize.

“Despite the challenges and bearing in mind that money given for this farming is a loan, the resilient Nigerian maize farmers were able to produce what is being unveiled today,” he said.

Also in a keynote address, the Minister of Agriculture, Dr. Mohammed Abubakar, who was represented by the North West Zonal Director of Agriculture, Dr. Timkat Vontav, said the CBN ABP has been able to close the gap between supply of maize grains and its demand by domestic and industrial users.

He said the Federal Ministry of Agriculture and Rural Development (FMARD) would also continue to support smallholder farmers as they have been identified as the engine room for the achievement of sufficient food production in Nigeria.

Demand Management FX Policy Has Stabilised Naira, Says Emefiele

Meanwhile, Emefiele has said the bank’s foreign exchange demand management policy had stabilised the naira at the Investors and Exporters (I&E) window.
He said the stability was particularly achieved followed the discontinuation of FX allocation to Bureau De Change operators along with the convergence between the CBN and the Nigerian Autonomous Foreign Exchange (NAFEX) rates.
Emefiele, also said the three-year bilateral currency swap agreement of $2.5 billion, equivalent to ¥15.0 billion or N720.0 billion between the CBN and the Peoples Bank of China (PBoC.) was already yielding positive results, and has helped to address supply gaps in forex administration.
He said the swap was part of the bank’s sustained efforts to reduce foreign exchange demand pressure and facilitate investment.
He added, “It is heartening to note that these policies are yielding positive results in terms of meeting genuine demand for foreign exchange and exchange rate stability.”

Emefiele, spoke at the opening of the 32nd Seminar for Finance Correspondents & Business Editors with the theme: “Exchange Rate Management and Economic Diversification in Nigeria: The Produce, Add Value and Export (PAVE) Option,” holding in Akure, Ondo State.

He also revealed that commercial banks are now able to meet the demands of their customers seeking forex for small and medium scale enterprises (SMEs), school fees, medical and Personal Travel Allowances (PTAs).

Represented at the seminar virtually by CBN Deputy Governor, Corporate Services Directorate, Mr. Edward Adamu, Emefiele, said the central bank’s policies aimed at managing demand for foreign exchange were beginning to have the desired impact.

He explained that it was in a bid to contain inflation and cushion the impact of the shortage of forex in the economy, that the apex bank not only tightened monetary policy stance over a period, but also introduced demand management approaches to conserve the reserves and support the domestic production of certain goods.

The CBN governor said the bank had also encouraged manufacturers to consider local options in sourcing for raw materials by restricting access to FX on some items, four of which accounted for over N1 trillion of the country’s annual import bills at the time.

He said the I&E Window was specifically established to allow for purchase and sale of FX at prevailing market rate, adding that CBN ensured the liberalisation of the foreign exchange market through the operationalisation of the Revised Guidelines for the Operation of Nigerian Inter-bank Foreign Exchange Market in June 2016.

According to him, the bank partnered with commercial banks to go after Nigerians who falsely bought dollars under the pretense of traveling abroad and ended up round-tripping.

The apex bank had also sanctioned BDC operators for illegal forex trading and discontinued the sale of forex to them, suspended the licensing of new BDCs and introduced the ‘Naira 4 Dollar Scheme’ to encourage diaspora remittances.

Emefiele said following the forex management measures introduced, the country’s current account deficit had narrowed significantly due to a surplus position in the goods account.

He pointed out that the surplus position in the goods account was a result of a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittances.

The CBN governor said remittance inflows had been supported by the bank’s ‘Naira for Dollar’ scheme, adding that there had since being a surge in remittance inflows.

Emefiele, however, said PAVE was expected to make Nigerians consume what they produce, add value to it, and even export the surplus.

He said the initiative was akin to south-east Asia’s much referenced export-led industrialisation policy which changed the economic fortunes of countries such as South Korea, Taiwan, Malaysia and Singapore.

According to him, PAVE was designed to be the key for fast-tracking a bucket of substitutes to crude oil export and encourages backward integration for the local production of select items.

He said, “COVID-19 pandemic is one of the biggest crises that has faced mankind in recent history. The pandemic impacted economies and disrupted business activities globally.

“Expectedly, Nigeria like most commodity-dependent countries was not spared the deleterious impact of the pandemic, given our dependence on crude oil export as a major source of revenue and foreign exchange. It is to mitigate against future severe consequences of shocks beyond our control that we must all join hands to ensure the success of PAVE. It is a clarion call to patriotism.”

Emefiele added, “Under my watch, the bank has done this through various development finance initiatives. And with the benefit of hindsight now, we can safely say that the outcomes have so far justified our approach.

“As you may recall, by June 2014 when I assumed office, the price of crude oil had substantially softened.  Geopolitical tensions were widespread and discussions around policy normalisation, post Global Economic and Financial Crisis (GEFC), filled the air, causing acute capital flow reversals especially in emerging markets like Nigeria.

“Our external reserves had fallen from a peak of $62 billion in 2008 to $37 billion. Also, due to the sharp drop in crude oil prices, the nation experienced a sharp drop in monthly foreign earnings from about $3.2 billion to less than $1 billion.”

He said, “These adverse conditions eventually plunged the economy into a recession for the first time in about a quarter of a century. The media space was suffused with news about the depletion of the country’s foreign reserves and the depreciation of the naira.

 “That tough period called for bold and innovative decisions to be taken and we did not shy away from doing what we considered to be in the best interest of our beloved country.

“Let me also remind us of the commitment I made while unveiling my vision for the CBN. It is on record that I had pledged to build a central bank that is professional, apolitical and people-focused.

 “My mission was and still is, to bequeath a central bank that focuses on building a resilient financial system that can serve the growth and development needs of our beloved country, Nigeria.

“For us, the CBN was to act as a financial catalyst by targeting strategic sectors that could create jobs on a mass scale and reduce the country’s import bills.

“To solve the immediate and long-term economic challenges of the country, we needed to create an enabling environment with appropriate incentives to empower innovative entrepreneurs to drive growth and development.”