The Central Bank of Nigeria will be churning out policies to support its goal to keep the economy going. Its ongoing programmes and sector intervention funding under its Governor, Godwin Emefiele, have helped in diversifying the economy towards growing the country’s Gross Domestic Products (GDP), reports Group Business Editor SIMEON EBULU
If there is any urgent desire in Nigeria today regarding what steps to take to drive the nation’s economic fortunes and take it to the next level, it is simply to diversify the economy. On this there is unanimity of agreement.
Diversifying the economy requires that the economic space be dissected to give room for other commodities other than crude oil, which had been and still Nigeria’s main revenue driver, to be harnessed to contribute their quota to the country’s overall GDP.
For too long the country has over relied on proceeds from oil to do anything and everything. The country had been hooked-on, or rather hoodwinked on relying solely on oil resources as though it has nothing else to fall back on. This has been the lie that had held the nation captive denying it from exploring other opportunities that abound across the length and breadth of the nation.
No option to diversification
But gratefully, the end of that era of a mono-economic policy culture, is about coming to an end, through initiatives and pursuits of the Federal Government driven largely by the Central Bank of Nigeria (CBN) and other specialised export oriented agencies.
The CBN Governor, Godwin Emefiele has been emphatic, saying the country has no choice but to diversify its economic dependence from crude to the non-oil. He has his reasons. He said the volatility of oil prices in the international market today underscores the harsh reality that the country is left with no choice but to diversify its economy away from oil into agriculture, manufacturing, services and other non-oil sectors.
Emefiele, told financial correspondents at a forum in Lagos that the dwindling oil revenue provides the nation a painful but indispensable opportunity to look inwards in a bid to trigger economic growth, urging that it was time Nigerians started to appreciate locally manufactured goods that would make local industries thrive and boost the economy.
Emefiele zeroed in on the real sector as the engine room of every economy, saying ” it facilitates the production of raw materials. He pointed out that because of the hallowed contribution of agriculture, mining and quarrying activities, including manufacturing and construction to the GDP which he put at about 43.2 per cent in 2014, “the CBN took the initiative to transcend its core mandate of maintaining monetary and price stability to also cover developmental activities, especially in financial intermediation and resource allocation to those sectors.”
He said the developmental finance initiative of the CBN has been hinged on the premise of economic growth, adding that concerted efforts were made to deepen credit delivery to the real sector. “We have the conviction that the sector has sufficient employment capabilities, high growth potentials, likewise its significant contribution to foreign reserves, industrial base expansion and growth potential of the economy,” he stated.
With the CBN initiative and in sync with other government regulatory agencies, emphasis is now gradually shifting to harnessing other resources in the non-oil segment, in which Nigeria incidentally has abundant comparative advantage to up the ante in its drive towards diversifying the economy. These overlooked segments, including agriculture, arts and crafts, buying and selling, lumbering, manufacturing, palm oil, cocoa, groundnut, tin, hides and skin, textiles, cotton, rubber, gold and many more, have been the main stay of the nation’s economy, pre and post-independence, until the emergence of crude oil. There is nothing abysmal in crude oil being added to the list of Nigeria’s economic growth agents, it is just that rather than engaging oil as an agent of development (the fastest for that matter), it became a distraction and a corrosive agent that eroded all other elements that had generated so much wealth that helped to lay the foundation of modern day Nigeria.
The country, rather than engage in wholesome harnessing of it’s resources in growing the economy, it seemed as though it found solace in operating a policy of elimination by substitution between oil and other commodities. Nigeria substituted every other growth element with crude oil, albeit to the detriment of the overall growth of the economy.
And now the black gold has started to manifest its limitation as the all encompassing growth agent. Global geopolitics, fluctuating price movements, production disruptions and alternate sources of energy, have ‘ganged up’ against Nigeria, or should we say, compelled her to now see the necessity to harness its abundant natural resources to drive its economic fortune and development.
This turn of event is what provided the leadership of the CBN, to articulate and initiate some of its far-reaching policies, the implementation of which are helping to provide the necessary space for other neglected sectors to thrive and contribute their quota to an economy that had become a mono economy hinged on only one commodity-crude oil. Now there is talk of an emerging diversified economy in which there are many contributors, both current and potential.
Anchor Borrowers Programme
From agriculture alone from which the CBN’s Anchor Borrowers Scheme has become a household name, many food and arable crops are beginning to make impacts in their contributions to the nation’s GDP. Across the country, and most especially in Kebbi State, rice farms are now measured in several hundreds of hectres, tomatoes, grains, cassava and maize have joined the queue. The limitation that the lack of funding and expertise imposed on farmers have been eliminated by the CBN under Emefiele’s leadership.
Intervention funds
The various intervention funds targeted at the power sector, Small and Medium Enterprises (SMEs), Aviation, the Real Sector, entertainment industry, textiles, among other incentives, are the fuel propelling the productive capabilities of many firms across the production chain today currently adding value to the nation’s overall GDP.
CBN’s economic diversification agenda
To unlock the potential of the real or manufacturing sector and position it for effective growth, value added productivity and job creation, the apex bank established a N300 billion Real Sector Support Facility (RSSF). The fund is expected to enhance the flow of credit to the private sector and enhance the productive capacity of the economy. The intent of the facility is to support large enterprises for start-ups and expansion financing needs of about N500 million and up to a maximum of N10 billion to qualified firms as the case may be.
Like the CBN chief said, the real sector is evidently the backbone of most great economies, which explains why the apex bank has been consistent in supporting the sector. Emefiele listed the real sector targeted by the facility to include manufacturing, agricultural value chain and select service sub-sectors, saying the facility is expected to improve access to SMEs to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors of the economy.
He said it is also meant to increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.
“The fund is to be managed by the Development Finance Department of the CBN which shall be responsible for the day-to-day administration of the facility,” listing the activities to be covered under the facility to include startups and/or expansion projects in manufacturing, agricultural value chain. Emefiele said services and trading shall not be accommodated under this facility,
The CBN Director, Banking Supervision, Abdullahi Ahmad, in applauding the policy, said: “It would probably be the first time in the history of this country where manufacturers would be able to take fixed interest rate loans for seven years, which means they would be able to plan. The volatility that they fear for all kinds of risks would be taken out and I think these are very laudable steps in improving and growing the economy.”
He said the idea is to have job- creating activities in the economy and as well bring interest rates down, saying although agric and manufacturing are the initial sectors considered for immediate attention, later a bank can apply if there is a job-creating sector that the bank is operating in.
Also, the Executive Director, Finance, First City Monument Bank, Mrs. Yemisi Edun, said this was a very positive development for the economy and the banks because the anks would be able to access these funds and earn on it, adding that because it would be coming at single digit rate, it would be positive for the economy.
“For now, it would be channeled to the agricultural sector and manufacturing for growth and to enhance the creation of jobs. The focus is to ensure that the economy grows so that we can achieved the stability we need to see a positive trend of growth and that is what we are committed to doing at this time,” she said.
In the RSSF, the CBN pointed out, will be limited to be Greenfield activities and expansion (Brownfield) projects in manufacturing, agriculture and other related sectors approved by it, stating however that emphasis would be placed on Greenfield, or nrw projects.
It prohibited operators involved in trading from accessing the real sector support facility, a move the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, thinks should be reviewed. He said the CBN should devise schemes as well for other sectors like the service, construction, maritime, transportation, healthcare, education, entertainment and tourism.
“All these sectors also bring value to the economy and generate employment. So, we need to look beyond the agriculture and manufacturing, because other sectors are also adding value and they also need funding.
“If anything, I think we need to get those who are already in business to be properly on their feet. We need to stabilise them and support them to be more productive, to accelerate the economic recovery process.
“Many of the firms are under the heavy burden of debt servicing, which is very costly. So, I don’t see anything wrong in easing the pressure for them with this kind of facility. I don’t support the idea of excluding them completely from the facility,” Yusuf said.
