Reappointed to serve a second term as governor of the Central Bank of Nigeria (CBN), Godwin Emefiele now has a rare opportunity to write his name in gold if he succeeds in sustaining his achievements and meeting the expectations of Nigeria at his second coming, write Nduka Chiejina and Collins Nweze.
Central Bank of Nigeria (CBN) Governor Godwin Emefiele got the nod of the Senate for a second term of office yesterday.
This followed a motion under executive communication moved by the Senate Leader, Ahmed Lawan and seconded by Senator Philip Aduda (PDP-FCT) at a plenary presided over by Senate President Bukola Saraki.
President Muhammadu Buhari, had on May 8, written the Senate on his reappointment of Emefiele as CBN governor for a second term of five years following the expiration of his tenure on June 2.
The letter read: “In view of the expiration of the first tenure of the current Governor of the Central Bank of Nigeria on June 2, 2019, and pursuant to the provisions of Section 8 (1) and (2) of the Central Bank of Nigeria Act 2007, I hereby present for confirmation by the Senate Godwin I. Emefiele for re-appointment as governor of the Central Bank of Nigeria for a final term of five (5) years. “It is my hope that the Distinguished Senate will consider and confirm the nominee in the usual expeditious manner.”
Stakeholders speak
The Association of Bureau De Change Operators of Nigeria (ABCON), said that the reappointment and confirmation of Godwin Emefiele as the CBN Governor for another term will sustain stability in the foreign exchange market.
ABCON’s President, Aminu Gwadabe, said this while reacting to the reappointment of Emefiele for another five -year term by President Muhammadu Buhari.
“The reappointment of Mr Godwin Emefiele is a good foundation to continuous foreign exchange market stability. “The ABCON Exco and its entire members nationwide congratulate the CBN Governor on his reappointment,’’ Gwadabe said.
The ABCON chief noted that Emefiele had excelled in many ways which included, uniform exchange rates in the market, elimination of exchange rate volatility and the deepening of the foreign exchange market, with the introduction of multiple FX windows.
Other achievements by Emefiele included the diversification of the foreign exchange inflows through enhanced investors’ confidence/Diaspora remittances, reduction on the import dependence of the economy through several agricultural borrowers’ schemes and a ban on 42 items that could be readily produced in Nigeria.
The president added that the CBN chief was instrumental in formalising the informal retail foreign exchange market.
While congratulating the CBN boss for his achievements, Gwadabe stressed that ABCON expects the CBN governor to be as proactive as ever through robust engagements.
“We expect a continuous stakeholder’s engagement and the empowerment of BDCs for global best practices. We also expect a downward review of associated regulatory fees paid by BDCs and the upward review of the margin of BDC transactions.
Ease of documentation
requirements
“The enhancement of ABCON’s self-regulatory status as recommended by the Financial Action Task Force (FATF) recommendations for industrial trade unions,’’ he said.
Emefiele was first appointed as CBN governor in February 2014 by former President Goodluck Jonathan.
Also, All Farmers Association of Nigeria (AFAN) said the reappointment and confirmation of Emefiele as the CBN governor was a confirmation that the President is `agriculture friendly’.
Chief Daniel Okafor, the Vice National President of the association, told the News Agency of Nigeria (NAN) in Abuja on Sunday, while commending the President for the re-appointment.
Okafor appealed to Emefiele to continue with the Anchor Borrowers Programme (ABP) and ensure that all agriculture commodities associations benefited from the programme in his second tenure.
He also appealed to the CBN governor to ensure the reduction of interest rates on agriculture loans to stand between three and five per cent.
Okafor appealed to the CBN governor to initiate other agriculture friendly programmes and also support the Bank of Agriculture (BoA) with funds to enable farmers’ access to agriculture loans.
“We welcome this development. We commend the President for re-appointing Emefiele.
“It means that the President is agriculture friendly. We thank him for that.
“We want the Anchor Borrowers Programme (ABP) to continue so we welcome his continuity. “The National Assembly should do the needful because farmers’ need the man at the helm of affairs in CBN.
“ CBN has been agriculture friendly since Emefiele’s tenure, but we want him to ensure that every commodity is accommodated in the ABP.
“We will like him to continue, he is a good candidate, kudos to Emefiele, but he should do more not only on ABP but he should also initiate other agriculture friendly programmes.
Head of Research, Coronation Merchant Bank Group Guy Czartoryski said: “The explanation in our view is that markets like stability and with Governor Emefiele we know what we are getting: continued defence of the naira/US dollar exchange rate at close to N360/$1; market interest rates designed to make naira attractive to foreign portfolio investors; positive interest rate carryover inflation. We see 1-year T-Bill yields settling in a range of 13.80 per cent to 14.50 per cent over the coming weeks and see a little catalyst for a change. We see the current N360/$1 exchange rate holding until at least end of this year,” he said in an e-mailed report to investors.
The yield on a Federal Government of Nigeria (FGN) Naira bond with 10 years to maturity declined by 25 basis points to 14.24 per cent, and at three years dropped by 19 basis points to 14.57 per cent last week.
The yield on 364-day T-Bill declined by 23 basis points to 14.16 per cent. The yield on T-bill with three-months to maturity increased by 21 basis points to 11.16 per cent.
The ‘Emefiele effect’, as we describe it, likely brings a sigh of relief to foreign portfolio investors who have put some $9.2 billion into the Nigerian markets of far this year.
Emefiele’s achievements
The strength of every economy lies in its ability to broaden the scope of financing development activities that will, in turn, create wealth and improve lives. The Central Bank of Nigeria (CBN) has as its priority, the task of stimulating economic development through interventions in key sectors of the economy.
When Godwin Emefiele came on board the CBN Governor on June 3, 2014, he recognised the crucial role to be played by the Development Finance Department (DFD) of the apex bank to stimulate growth in the real sector despite visible pressure on the naira as well as a decline in foreign reserves.
Emefiele was determined to reposition the developmental financing initiatives of the bank to boost specific enterprise areas like agriculture, manufacturing, health and oil and gas.
The CBN chief also promised to establish Secured Transaction and National Collateral Registry as well as a National Credit Scoring System that will improve access to information on borrowers and assist lenders to make good credit decisions.
Besides, he set out to build a resilient financial infrastructure that serves the needs of those at the lower rung of the market, especially those without collateral.
Real sector facility
The CBN under Emefiele has given the needed boost to the real sector.
Emefiele explained that the N300 billion Real Sector Support Facility (RSSF) was part of the CBN’s efforts to unlock the potential of the real sector for output growth, value-added productivity and job creation. According to him, the facility would support large enterprises for start-ups and expansion of the financing needs of N500 million up to a maximum of N10 billion.
He said: “The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors. The facility is expected to improve access to finance by Nigerian Small and Medium Enterprises (SMEs) to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors.”
Another N213 billion Nigerian Electricity Market Stabilisation Facility is aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). The facility covers legacy gas debts and the shortfall in revenue during the Interim Rule period (IRP).
It is expected that this will guarantee the take-off of the Transitional Electricity Market (TEM). Already, over N56.68 billion disbursed to five generating companies and five distribution companies.
The observed challenges in the power sector, Emefiele said, are interconnected with the unexpectedly huge revenue shortfalls in the industry, which needed to be fixed.
He said the Agricultural Credit Guarantee Scheme Fund (ACGSF) was established to provide credit guarantees on facilities extended to farmers by banks up to 75 per cent of the amount in default net of any security realised.
The bank chief explained that the period under review witnessed an increase of loan limits for unsecured lending from N20,000 to N50,000 and that the loan limits for secured lending to corporate bodies under the ACGS rose from N10 million to N50 million.
To boost agriculture financing, the ACSS was inaugurated to develop the agricultural sector of the economy by providing credit facilities to farmers at single digit interest rate to enable large scale farmers to exploit the untapped potentials of the sector.
Statistics from the CBN showed that since June 2014, 60 per cent of the Commercial Agricultural Credit Scheme (CACS) funds have been dedicated to six focal commodities (rice, wheat, cotton, sugar, dairy products and fish), which have been utilising huge resources from the dwindling foreign reserves.
According to the data, the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) was launched in 2014. It further showed that N43.57 billion has been disbursed to state governments, participating financial institutions (PFIs), microfinance institutions and finance cooperatives. More than 61.6 per cent of the beneficiaries have been found out to be women and N30.31 million has been accessed by 292 People Living with Disabilities (PLWD).
Supervision of other
financial institutions
The CBN issued a final licence to the National Mortgage and Re-financing Company (NMRC) to commence operation last year under the Housing Fund Programme (NHFP). The bank carried out further reforms of Primary Mortgage Banks (PMBs).
The apex bank also carried out further reforms of Primary Mortgage Banks (PMBs) where 32 PMBs had fully capitalised as at June 30, 2014, while 10 were in the category given up to December 31, 2014. Licences of 21 PMBs, which failed to recapitalise, or had remained technically insolvent, were revoked on November 12, 2014.
It (CBN) partnered with the Federal Government and development partners to midwife the Development Bank of Nigeria that is envisaged to address the paucity of low interest and long-term funding for Micro Small and Medium Enterprises (MSMEs).
The CBN also established a governance structure for the National Financial Inclusion Strategy and completed the geospatial mapping survey of all financial access points across the country. It has also engaged seven state governments on the implementation of the National Financial Inclusion Strategy as well as ensured the gradual reduction in the percentage of financially excluded adults from 46.3 per cent in 2010 to 39.5 per cent by December 2014.
“Other schemes include the Power and Airline Intervention Fund (PAIF), Capacity Building programmes through the existing Entrepreneurship Development Centres (EDCs) and the CBN/NYSC Entrepreneurship Training held in four centres,” it said.
Banking and payments system
In collaboration with the Office of the Accountant General of the Federation (OAGF), e-collection element of the Treasury Single Account (TSA) started on September 15. Real-time remittance of government receipts directly into the Consolidated Revenue Fund Account (CRF) to enthrone transparency and accountability in the management of government receivables. Also, promotes effective monetary policy and reduce the cost of liquidity management borne by the bank.
The MDAs, under the TSA platform, have increased from 340 to 543. In continuation of the BVN scheme for banks customers, enrolment rose from 15,000 as at June 3, 2014, to over 20 million presently.
Managing Director, Meristem Wealth Management, Sulaiman Adedokun, said depositors are to get more interest on their deposits because of the implementation of the TSA.
The investment expert said: “When government earnings are warehoused in a single account, there will be many things to work out, especially the funding of certain sectors of the economy. But, that is on the logistics part of it. The actual impact of this is the crowd out effects from the banking sector because the interest will go up, as banks go on looking for more deposits”.
“And again, with the TSA, we have a better declaration of funds, adding that states can even get better allocation under the TSA regime because leakages are blocked.”
Challenges:
Emefiele’s achievements did not come easy. As CBN Governor he witnessed two general elections in his first term. Elections in Nigeria witness a lot of money in circulation from politicians trying to curry votes from electorates and governments (state and federal) engaging in politically motivated spending on capital projects to show that they are working for the benefiting communities. These huge spending places a lot of burden on the Central Bank to manage currency in circulation and its attendant inflationary problems. Emefiele like his predecessors raised alarm on several occasions and warned against such spending within a short period. To mitigate this threat to the economy, the CBN put in place mechanisms to quickly mop up this excess liquidity and tighten currency flow.
Also under his watch, the country went into recession after he had warned of the impending danger. His management of the monetary and suggestions at the Monetary Policy Committee (MPC) meetings for greater spending to reflate the economy contributed to a quick exit from the recession for the country.
Another challenge which Emefiele had to confront was the management of foreign exchange. There was a period the naira was exchanging for N500/$ and there were speculations that it would hit N1,000/$. The CBN stepped in to save the Naira through its weekly pumping of forex into the market to stabilize the currency. Some have argued that his intervention in the foreign exchange management amounts to interfering in the market and that the market should be left to find its true value and the time he took to intervene had allowed currency speculators to make huge gains from the forex rate differentials. However, his decision however late has seen a stable foreign exchange regime and a significantly narrowed window of difference between the official rate and parallel market in the last two years. He has been helped in this regard with a steady rising external reserve also occasioned by his policies.
When Emefiele placed a forex ban on 43 items, a novel idea, he probably didn’t expect the backlash from those whose activities were disrupted by his decision. Campaigns were mounted by importers of these 43 items against the ban. Undaunted by their campaigns, Emefiele stood his ground to support the growth of industries that had been wiped out as a result of easy access to forex… Today many industries are picking up and there appears to be light at the end of the tunnel.
Expectations
As Emefiele prepares to kick off his second term in office as CBN Governor, a lot will be expected of him. He has been accused of not being bold in his handling of the interest rate. He held rates unchanged for two years at 13% before loosening it to 11% recently. He will be expected to bring interest rates down, if possible to a single digit but not at the expense of other economic considerations. Interest rate is a key driver of economic growth as businesses, large and small are encouraged to approach the banks to borrow thus helping to grow the economy and facilitate job creation, innovation and employment depending if they are reasonable. Reduced interest rates encourage borrowing by businesses but the cost to the banks also needs to be considered and an agreeable balance needs to be struck.
The CBN under Emefiele also needs to follow through its earlier appeal to banks to make their loan accessing forms or documents short and easy to understand by borrowers. Many borrowers have accused financial institutions of “burying booby-traps” in their loan documents to entrap borrowers into servicing debts beyond a reasonable time. The CBN will be expected to take a firm stand and make banks to draft short and easy to understand agreements
Also, many bank customers are lamenting the dubious bank charges imposed on them by their banks. From ATM maintenance charges to multiple text messages for a single electronic transaction, and other funny charges that banks cream off their customers. Why the CBN has not taken a firm stand against some of these arbitrary and annoying charges by banks leaves much to be desired.
The apex bank has done well with its interventions in different sectors, Nigerians would like to see the CBN continue with these interventions.
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