…Says ‘Protectionist’ policies are for Nigeria’s economic prosperity
…Bemoans low banks’ lending to key sectors of the economy
The Governor, Central Bank of Nigeria, Mr. Godwin Emefiele, says the apex bank is focused on delivering improved and sustained economic policies for the country in the 2020 fiscal year.
The CBN Governor also noted that only policies that will push domestic growth, improve non-oil export as well as reducing unemployment will be driven by the central bank.
Speaking at the 54th Annual Bankers Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos over the weekend, Emefiele noted that Nigeria must improve a significant per cent of its export earnings so as to improve revenue generation because of we cannot continue being a consuming nation.
According to him, in 2017, Chile with a population of 18 million people was able to fetch $88 billion from exports of 12,800 product, whereas Nigeria with a 200 million population earned $55 billion from just 860 products in the same year.
“Policymakers keep emphasizing that if our country will ever grow in a high single-digit or double-digit, domestic production and expanding our non-oil base is critical as we must consume what we produce and produce what we consume.
“We’re aware that there are constraints to growth of non-oil sectors such as logistics and manufacturing sector, but government has started tackling these challenges with the construction of railways and roads such as the Lagos-Ibadan expressway, Abuja–Kano highway and second Niger Bridge, as it will help in transporting goods and raw materials to all parts of the country.
“Also, policy priorities of the CBN such as Anchor Borrowers Programme, Commercial Agriculture Credit Scheme and monetary policy may not be able to solve structural challenges, however, its influence on financial conditions that avails farmers and SMEs and manufacturers credit can spur growth in agriculture, manufacturing and non-oil sector and support the government’s effort towards promoting sustainable growth and ensure the economy is not susceptible to changes in oil price,” Emefiele explained.
Although, he admitted that some policies of the central bank has been termed protectionist in nature but he added that leaders are accountable first to citizens and nation and that if international trade threatens citizens, leaders must react to improve the lots of its people to achieve nationwide objectives.
He added that countries of the world have taken harsh decisions that is now yielding positive results which is why the bank strongly supports the border closure by the Federal Government as in the case of India and the United Kingdom.
“For instance, the issue of onion prices in India, Indian farmers export 2.2 billion kilograms of onions per annum which worth $5000 million annually. However, due to unfriendly seasonal rains this year in India, production was significantly low and so local prices increased to a six year high. The surge in process of onion hit Indian household given that onion is a stable of Indian foods which led to inflation.
As such the Prime minister of India Narendra Modi last month insisted and banned the export of onion in India until further notice with the immediate result being more onions for local consumers at rapidly decelerating prices, putting a dent in the headline inflations.
“Although the policy is protectionist in nature, it is indeed what great leaders do to protect the lives of their people. Although the ban made the onion process higher for its neighbours, the government cared less as long as its citizens were comfortable.
“Another example is the decision of the London city authorities just last week not to renew the operation license of Uber in London regardless of the reason they may have adduced, the result is that it is a boom for London local taxi and a move to keep jobs in the hands of indigenous London drivers and this what great leaders must do to help their people.
“As such, any policy that the government is bringing up first is to improve the living conditions of citizens and promote sustained growth which is why at the meeting of the Monetary Policy Committee of the Central Bank came out strongly to support the border closure by the federal government and if unemployment can reduce and wish to see our industry grow, then we must support the government to protect its borders.
“The CBN also urges policymakers to concentrate on making lives better for their citizens and worry less about their neigbhours as this is exactly where the CBN stands which is yielding results as jobs are being created for our rural communities where close to 65 per cent of Nigerians reside and also leading to resuscitation of local industries,” the CBN governor explained.
On the priorities and projections for the new fiscal year, Emefiele said inflation is expected to rise due to border closure while Gross Domestic Product is expected to also appreciate as the bank intends to hold on to its tight monetary stands.
“Over the next year, the CBN intends to support economic growth, price and exchange stability by engaging in, the monetary policy decision will be research-driven and supportive of realities.
On the tight stand, it is expected to continue in the near term especially now with the rising inflation expectations. Although we will adjust policy rates in line with unfolding conditions and outlook, the Central Bank of Nigeria will continue to ensure that interest rate is set to balance stability with output stabilization.
“On Gross Domestic Product, we will drive indigenous production in high sectors in agriculture and manufacturing and improve in access to credit.
GDP growth is expected to pick up in the last quarter of 2019 and will be accompanied by the anticipated budgetary spending from 2.28 per cent in the third quarter to 2.5 per cent by the fourth quarter of 2019.
“On inflation, we expected it to rise from 11.61 per cent to around 11. 8 per cent by the end of 2019 and moderate thereafter which will be supported by the CBN’s effort in supporting domestic production of staple food items.
“On exchange rates, although the CBN has managed to maintain exchange rate stability, the current capital flow reversal from an emerging market is expected to impact on market rates. Notwithstanding these pressures, the CBN is determined to maintain its exchange stands in the near term.
“On access to finance, CBN has issued shared payment licenses to three companies in 2019. Our objectives is to support robust payment infrastructure and bring people into the financial service and support innovation to reduce financial exclusion rate by over 20% in 2020.
“Access to credit for farmers and small and medium enterprises, anchor programmes and commercial agriculture scheme will be boosted to stimulate growth in the agriculture and manufacturing sectors to improve ability of farmers to meet the raw material needs of industries. By so doing, banks will be able to lend to farmers and MSMEs.
“The CBN has also increased loan to deposit ratio of 65 per cent along with restriction to access to the Open Market Operations window in order to ensure financial institutions are support the growth real sector,” Emefiele stated.
He, however, knocked the countries’ commercial banks for their inability to give credit for real sector development.
“Nigerian banks are one of the low lenders in major emerging markets with an average loan to deposit ratio of below 60 per cent. This is relatively low because in comparison with peers, South Africa has loan to deposit ratio of 90 per cent and about 76 per cent in Kenya. Our loan to deposit ratio is very low.
“However, the CBN’s efforts are however yielding fruits as gross credit increased by 5.3 per representing (N16.4trn) about $45bnn at the end of September 2019.
In order to ensure that it doesn’t deteriorate assets and loans held by banks, we have deployed measures to improve credit risk assessment by supporting the development of consumer credit database which will aggregate data from different sources so as to determine the creditworthiness of borrowers.
This initiative is worked on with credit bureau and banks. This will enable banks to provide loan to borrowers and it will penalize serial defaulters,” he added.