Emefiele: Exogenous Factors Shouldn’t Be Determining Nigeria’s Prosperity
Central Bank of Nigeria Governor, Mr. Godwin Emefiele, in a recent post Monetary Policy Committee meeting interview among other things, spoke about measures to be taken to pull the Nigerian economy out of recession. Obinna Chima brings the excerpts:
Are there other measures the central bank intends to take to stimulate the economy considering the recession and what are the steps the monetary authorities intend to take to make us exit this recession quickly?
Like you all recall in March this year, when the COVID-19 surfaced in the country, the CBN came out very quickly and put on the table a couple of initiatives that we believe were meant to help alleviate the pain on our people. Firstly, we talked about how the banks should restructure their facilities, how interest rates should come lower particularly for CBN interventions and how repayments could be spread for those who are owing banks, so that they can have some respite given that their cash flows have been badly affected. On another hand, we also proposed that for targeted credit facility to household and small scale businesses that are adversely impacted by COVID-19, we put on the table N50 billion for them. These were unsecured facilities meant for people who we feel are impacted and they just needed some little money either to start business or conduct some kind of consumption so as to help them live their lives during the period of the pandemic. We also made available N100 billion for the healthcare industry, for pharmaceuticals and hospitals, for their upgrade and buildings of new ones. In addition, we made available also a facility of N1 trillion for corporates who are will to expand either in the agriculture or manufacturing sector. Let me say that till date, we have seen tremendous response on these initiatives. And I must also say that these initiatives, together with those that have come from the fiscal authorities, have been responsible for the somewhat moderated impact of COVID-19 on the lives of our people. Till date, rather than the N50 billion, the CBN has disbursed through its participating financial institutions, the sum of N149 billion to almost 317,000 beneficiaries. On the healthcare, approximately N60 billion has been disbursed to 60 healthcare projects; whether they are hospitals or pharmaceutical companies who are into healthcare and drug manufacturing. On the real sector, we have disbursed N350 billion to over 105 real sector projects during this same period. For the Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS), which is for those going into small businesses – poultry, hairdressing and the rest, we have also disbursed over N92 billion to more than 27, 000 people. For the youths under the creative industry funding initiative, we have disbursed almost N2.9 billion to our youths in the area fashion, ICT/ software development, in the movie sector and in the music sector. Now that we have seen that these have been quite impactful, particularly the targeted credit facility which is meant for households and SMEs, because what we saw during this period was that it helped to boost consumption spending for our SMEs. And if recall that consumption constitutes almost over 70 per cent of output, you will know that this has been very, very impactful in moderating the impact of COVID-19 on productivity and output and GDP in our country. We have been advised or we have been nudged on by the Monetary Policy Committee that given that this has been impactful, that the CBN should do more. With N50 billion on the table, we have so far disbursed almost N149 billion to 317, 000 beneficiaries. And we have been told that we need to increase it, not just from N150 billion or N149 billion that it is now, but that we should increase it to about N250 billion or N300 billion to accommodate more people that have not accessed this facility. But we do insist that this must be done in a way that it goes round, because we found out that some zones are more represented than others. But it is understandable that for instance a zone like the north central where
we have predominantly Abuja or South-west where you have predominantly Lagos, will certainly have a larger share. But the most important thing is that we want to use this as an opportunity to see what can be done to boost consumption spending for our people and also see to it that output is stimulated positively for the good of our people. The second question what about the specific steps being taken to exit recession? Recession or contraction in growth or in output is what we are seeing throughout the entire world as a result, not only drop in commodity pricing, but because of the adverse consequences of the health crisis created by COVID-19. In some developed countries during the first, second and even the third quarter, we saw some of them showing double digit contraction in growth. But in Nigeria, we saw a contraction by 6.1 per cent and I will say pleasantly, in third quarter, a reduction in output by 3.6 per cent. Let me say that we are hopeful and the Minister of Finance address some gathering where she said she is hopeful that during the first quarter of 2021 Nigeria will exit recession. Based on data available to the Monetary Policy Committee from the CBN, we are somewhat cautiously optimistic that indeed if we continue doing what we are doing and do more , there is a likelihood that we will see some little positive output numbers during the fourth quarter 2020. But I can say with some level of certainty as well that we are so certain that during the first quarter of 2021, we will exit the recession. Why? As a result of all the actions taken by the monetary and fiscal authorities, the National Bureau of Statistics numbers showed that 18 sectors during the third quarter recorded growth, relative to 13 sectors during the second quarter. And these growth were recorded mainly from the agricultural sector, industry manufacturing. Indeed, we saw even services dropping somewhat slightly. But agriculture coming on strongly also means that what we can achieve from whatever we are doing to stimulate agriculture and manufacturing, will create jobs for our people and also stimulate spending; will increase output and ultimately lead to the moderation of the level of inflation in our country.
The parallel market rates have depreciating once more, I will like to know what your comments are on this development and inflation rate is now at about 14.2 per cent, what measures are you putting in place to address this?
Indeed I heard some analysts talking about the parallel market, saying that the naira exchange rate is at N480 to a dollar. I want to say this, that it is unfortunate that and really unfair that even analysts who are supposed to know, will play with numbers and begin to determine the exchange rate of our currency using parallel market rate. For the information of everybody, parallel market as far as we know and the data that we have, is a shallow market in Nigeria, with no more than five per cent of market share. The parallel market is a tainted market in Nigeria where people who desire to deal in illegal foreign exchange transactions, including sourcing of forex cash for purposes of offering bribes, corruption, that is where they deal. And that is where people who are supposed to understand the implication of this on the economic activity on our country begin to go on television to say that our exchange rate is N480. This is very unfortunate that this is the way those who are supposed to know try to bend numbers in this country. Parallel market is a market where people who do not want to provide documentations to support their transactions deal in. It cannot be a basis to determine the value of our currency. Everybody knows and it is accepted that the NAFEX market which is predominantly the Investors and Exporters’ window, is the market that should be used to determine the exchange rate of our naira. As far as we are concerned today, the NAFEX ranges today between N380/$1 going to N386/$1 and N387/$1. And we have been very open about the market price determination factors in that market. The central bank has no hand in price determination in that market. And in any case when people say that it should
We need to continue to tell people that Nigeria is the country with the highest population in Africa, a country with the highest GDP in Africa and so we should not be a country that sneezes when price crude price drops