Central Bank of Nigeria (CBN) Governor Godwin Emefiele’s reappointment by President Muhammadu Buhari for a fresh tenure has been seen as a vote for continuity in far reaching interventionist and regulatory policies of the apex bank, writes Group Business Editor SIMEON EBULU
When Godwin Emefiele came on board as the CBN Governor on June 3, 2014, he recognised the crucial role expected of the Development Finance Department (DFD) of the apex bank to stimulate growth in the real sector despite visible pressure on the naira and 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, oil and gas, among others.
The policies were largely in response to the challenges facing the country, ranging from low revenue intake arising from falling oil prices, high cost of food imports and an unstable naira/dollar exchange rate, and other exogenous issues including insecurity. It was the resolve of the regulator that it must respond in line with President Buhari’s resolve that Nigeria must initiate home-grown policies to address its domestic and economic challenges.
The CBN Governor and his team aligned with the President’s opinion that designing and engaging home grown policies will do the magic. The Anchor Borrowers’ Programme (ABP) and others that subsequently followed, true to expectation, did the trick and pulled Nigeria out of recession and repositioned it on growth path. The ABP has not only stemmed importation of food imports, it has in addition, made millionaires of otherwise peasant and poor farmers. It has also ensured food security with the expansion of the scheme to include other food crops.
The CBN has so far cumulatively disbursed N174. 48 billion through 19 financial institutions under the Anchor Borrowers Programme since 2015, said the apex bank’s Director, Corporate Communications Department, Isaac Okoroafor at the Enugu International Trade Fair.
Okoroafor, who was represented by the Deputy Director, Mrs Veronica Always, said the programme has supported 902,518 farmers, working with 194 anchor companies, adding that 2.8 million and 8.4 million direct and indirect jobs respectively have been created
He said the institution has over the years sustained its intervention in other critical sectors like power, aviation, health and others, which have triggered robust economic growth and development in the country.
The CBN chief also established the Secured Transaction and National Collateral Registry as well as the National Credit Scoring System that improved access to information on borrowers and assisted 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.
Customer service
So far, the CBN has facilitated the refund of N4.01 billion to bank customers based on complaints that were resolved and directives communicated to them following the Consumer Compliance Examinations and a spot-check conducted on the banks. The apex bank has also concluded full deployment of the Consumer Complaint Management System (CCMS) with the migration of all banks to the live -platform of the system.
The regulator launched the Cashless Nigeria Project in Lagos State in 2012 and by July 2015, the project went live nationwide.
Cashless Initiative
CBN’s Director of Payments, ‘Dipo Fatokun, said the cashless project was meant to support the use of e-channels of payment, reduce service cost, increase tax collection, reduce leakages and enhance greater financial inclusion, as well as engender economic growth. He said the policy initiative was muted against the backdrop of cash dominance in the payment system, a development which encouraged the circulation of huge sums of money outside the banking system and imposed huge currency management cost on the economy.
The CBN also introduced Agent Banking aimed at increasing financial inclusion, while the inauguration of Electronic Payments Incentive Scheme (EPIS) was to encourage the adoption of e-payment by rewarding merchants, card holders and sales persons in the transaction chain.
Head, Acquiring Cards and e-Banking Department, Ecobank Nigeria, Mrs. Funso Oyelohunnu, commended the CBN for the EPIS reward initiative, stressing that it would further encourage the use of e-payment channels. “This is a great initiative. As a bank, we are glad that one of our customers is one of the winners. This is a further proof that our various e-payment channels are efficient. This is an opportunity to urge both customers and non customers of the bank to make our e-payment channels their choice,” she said.
Also, an official of the Banking Payment System Department of the CBN, Isah Abubakar, said the apex bank will continue to give the desired support for the EPIS project. He hailed the transparent process used in selecting the winners, saying the cashless banking initiative has been helping to promote financial inclusion and getting banking to the grassroots. The CBN, in his words, ” is behind the incentive scheme and will support any project that takes banking to the grassroots.”
Real sector support
The CBN under Emefiele leadership, has left no sector unturned. The apex bank, recognising the need to rejuvenate manufacturing, set aside N300 billion known as Real Sector Support Facility (RSSF). It is envisaged that it will unlock the potential of the real sector for growth, value added productivity and job creation. As Emefiele said at its inauguration, 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 listed the real sector activities targeted at the facility as manufacturing, agric value chain and selected service sub-sectors. The facility, Emefiele said, “is expected to improve access to finance by Nigeria’s 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).
The facility was to serve as guarantee for the take-off of the Transitional Electricity Market (TEM), for which over N56.68 billion had been disbursed to five generating companies and another five distribution outfits.
The CBN chief had observed that the challenges in the power sector, are interconnected with the unexpectedly huge revenue shortfalls in the industry, which he stressed, “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. Statistics from the CBN also 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.
Another pro-growth initiative of the Emefiele regime, is the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) that was launched in 2014. Out of it, N43.57 billion was 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 to be women and N30.31 million has been accessed by 292 People Living with Disabilities (PLWD).
Exchange rate management
Emefiele assumed office when there was pressure on the naira as well as a decline in foreign reserves. But, the CBN took measures to shore up the naira, it also ensured that the local currency remained stable, especially at the official market where it exchanged for N198 against the dollar at the time.
To check the naira volatility, the CBN stopped the funding of Bureaux de Change (BDCs). In announcing the policy shift in Abuja, Emefiele said: “The bank (CBN) would henceforth discontinue its sales of foreign exchange to BDCs, saying operators in this segment of the market would now need to source their foreign exchange from autonomous sourcess. As a safeguard from being used as conduit for money laundering, Emefiele said the CBN will “deploy more resources in monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws”.
The apex bank in the past one year, or so, has regulated the operations of BDCs to check rent-seeking among operators, depletion of the nation’s foreign reserves, unauthorised financial transactions, dollarising the economy, checked the number of unwieldy BDCs and tamed the unenviable position of Nigeria as the largest importer of dollars in the world.
For instance, out of 130 BDCs sampled based on volume of purchase from banks, as at the time of the reforms, the apex bank found 121 BDCs, representing 93 per cent to be in breach of the objectives and provisions of the guidelines.
The sanitising drive of the regulator has been variously praised by the Civil Societies Organisation (CLO). CLO President Igho Akeregha said the apex bank’s decision to stop sale of forex to BDCs was in order, stating that those faulting the apex bank’s decision do not mean well for the economy.
He said the BDCs have veered off their roles in the economy and become windpipe for politicians, who are mainly their owners.
Akeregha agreed with the CBN’s prioritisation of its forex cache, optimising its use in supporting the most productive sectors of the economy, that are at the forefront pulling the economy on a growth trajectory. He urged the CBN to plug all the leakages and have a hands-on approach to stem further devaluation of the naira.
Towards achieving the bank’s mandate of ensuring the safety and health of the financial system, the Emefiele team, conducted a risk-based examination of all banks with high and above average composite risk rating in June 2014 and those with moderate and low composite risk rating in September 2014.
Among other examinations, the CBN carried out the foreign exchange examination of all banks in September 2014, as well as the routine examination of all discount houses and financial holding institutions in October 2014. In January 2015, it carried out the risk asset examination of 24 banks as at December 31, 2014.
The apex bank has since commenced the implementation of the Basel II Accord aimed at promoting stability in the financial system by ensuring adequate capitalisation of the banks.
Oversight of other financial institutions
Besides reforming the BDC segment, the CBN issued a final licence to the National Mortgage and Re-financing Company (NMRC) to commence operation under the Housing Fund Programme (NHFP). The bank also carried out further reforms of Primary Mortgage Banks (PMBs), with 32 PMBs now fully capitalised, 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.
The CBN, in partnership with the Federal Government and other development partners, including the World Bank, has midwifed the Development Bank of Nigeria to address the paucity of low interest and long-term funding for Micro Small and Medium Enterprises (MSMEs).
Under Emefiele leadership, the CBN established a governance structure for the National Financial Inclusion Strategy and completed the geo-spatial mapping survey of all financial access points across the country. It has also engaged some state governments on the implementation of the National Financial Inclusion Strategy as well as ensure the gradual reduction in percentage of financially excluded adults. CBN Governorhas continued to take steps meant to deepen banking services in the economy. The hope for Nigeria to achieve 80 per cent financial inclusion rate come the year 2020 received a major boost, when the Enhancing Financial Innovation & Access (EFInA), released the result of its 2018 survey figures. The survey showed that 63.6 per cent of Nigeria’s adult population now has access to financial services and only 36.6 per cent are now financially excluded.
BDCs opinion
Association of Bureau de Change Operators of Nigeria (ABCON) President Aminu Gwadabe praised Emefiele’s leadership, especially his determination to source petrodollars from International Oil Companies (IOCs) and other autonomous sources for BDCs.
He explained that BDCs lack the capacity to deal directly with the IOCs because of the intricate nature of the transactions, saying operators would rely on the CBN’s expertise and experience to handle the transactions and boost liquidity in the system.
Also, financial analyst, Stephens Adegbesan, said that under Emefiele’s watch, there haa been improvement in corporate governance as well as risk management processes in many of the lenders, saying the beauty of the banking reforms which Emefiele inherited and which he has ably managed, remains that no bank has failed, and no depositor lost money with the entire process executed with minimal cost.
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