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By Amaechi Ogbonna
On Monday, January 31, 2022 when the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, formally inaugurated the 100 for 100 Policy for Production and Productivity (PPP) funding initiative to boost the country’s industrial capacity and output, it was obvious that a new vista of development finance opportunity had already opened for Nigeria’s embattled economy.
At that unveiling and public presentation of cheques to the first batch of its 100 for 100 PPP initiative, the CBN doled out a total of N23.20 billion worth of low interest credit to 28 companies whose projects were adjudged to have met criteria set for the scheme.
The cheque presentation was coming after the CBN boss in October 2021 announced a policy that would see 100 eligible companies in priority sectors of the economy being supported with funding from the apex bank every 100 days, effective from November 1, 2021.
Emefiele had hinted that the disbursements, which are loans repayable by beneficiaries, followed an earlier screening of applications received for projects valued at N23.20 billion.
According to the CBN boss, the first batch of beneficiaries comprised 14 companies in manufacturing sector, 12 in agricultural sector and two in the healthcare sector, each of which was expected to use the facility for capacity expansion, create jobs and earn foreign exchange for the economy.
As one of the intervention schemes of the apex bank, the 100 for 100 Policy for Production and Productivity (PPP), is designed to stimulate investments in Nigeria’s priority sectors with the objective of boosting production and productivity in support of efforts towards stronger economic growth and employment opportunities.
Under this initiative, every hundred days, manufacturers in critical sectors that seek to engage in greenfield projects or in expanding their existing facilities will have access to cheaper forms of credit at single digit rates, as well as foreign exchange to procure plants and machineries. The programme, the CBN said has the potential to significantly accelerate manufacturing output, promote further diversification of the economy and enable faster growth of non-oil exports.
More significantly, the PPP will help to reduce the nation’s over- reliance on imports, by stimulating productivity in agriculture, healthcare, manufacturing, extractive industries, logistics services, trade- related infrastructure, and renewable energy.
This explains the reason behind CBN’s resolve to fund manufacturing as well as strengthen the non-oil export sector to get them back to productivity.
Emefiele stated that the cardinal objective of the 100 for 100 PPP initiative, was to ensure that more priority is accorded companies that demonstrate capacity in its imports substitution and job creation mandate in line with the policy of the Muhammadu Buhari administration.
Under the first phase, about 79 applications valued at N121.87 billion, were received by the central bank from commercial banks, for projects in six sectors, namely agriculture, energy, healthcare, manufacturing, mining, and services sectors. The applications were assessed based on production efficiency and scalability; local content capacity; job creation and human capital development; operating sector relevance; and potential contribution to economic growth.
Out of the number, only 28 companies with projects that meet the set criteria were eventually selected for funding.
Although, critics of the intervention scheme have often questioned the rationale behind the CBN’s involvement in real sector financing given that its primary mandate of monetary and exchange rate stability as well as price stability, still need much to be desired, other commentators have seen the intervention as a deliberate strategy on the part of Federal Government to help revitalise the nation’s moribund manufacturing sector particularly against the backdrop of the COVID-19 pandemic which had devastated the economy over the past two years.
The bank had argued however that much of the foreign exchange crisis currently facing manufacturers could be directly related to the country’s weak domestic output from the manufacturing sector and a struggling non-oil export sector.
It noted that by strengthening the Naira against other currencies by increasing export capacity.
Years ago, manufacturing and agricultural sectors were the live wire of the Nigerian economy, but both suddenly lost steam with the massive emphasis on importation of foreign goods and services from Asia, Europe and the United States of America.
More importantly, the country’s lack of capacity for value addition and consistent export of raw materials continues to pose major obstacles to Nigeria’s global competitiveness.
This scenario had persisted until recently when the CBN started to intervene in critical sectors of the economy and funding activities that could impact the economy and its ability for job creation.
But in his reaction, Mr Daniel Dickson-Okezie- Chairman, SMEs Group, of the Lagos Chamber of Commerce and Industry (LCCI), queried, “How many companies do we actually have in this country. Most companies have relocated to West African countries and some have folded up due to the harsh environment.
What is happening now is trying to bring a solution to a problem, thereby throwing it into a harsh environment. Our environment is presently not enabling at all. You can bring as much as $100 billon or trillion into the economy and it will not make any difference.
An enabling environment is key. The government should create enabling environment for businesses to thrive. Not necessarily doling out grants or subsidies. What matters is the basic challenges, we have to put them right. The power situation is not improving, forex challenge and others. The regulatory agencies are they doing what they are supposed to do. The problem is not just giving out these monies, short term or long intervention policy.”
He argued that interventions don’t actually solve problems 100 percent. Similar policies have come and gone and the challenges with our economy remain with us. We need to solve these basic infrastructural issues. The grant may help a few businesses, some companies may corner the funds to other uses that may not work out the purpose and help industrialisation. I don’t really know the security measures put in place to check this.
Some of these initiatives and policies are becoming what they term policy somersault. There is need for some kind of sustainability in the system . Businesses and investments are based on confidence. Nobody wants to invest in an environment where the risk of doing business is high. So many industries have closed down in the last seven years. I don’t think this policy can make any difference. Nigeria is so large and things have gone really bad.
Funding only 28 companies is low for a country like Nigeria with over 200million citizens. But we must appreciate the effort of the CBN so far because we don’t have the industries.
But according to Mr Obinna Anyanwu, Chairman, Financial Services Group of the Lagos Chamber of Commerce and Industry ( LCCI) Nigeria’s unemployment figure is rising by the day, and if nothing is done about it, it’s just like a ticking time bomb that will explode soon. The initiative was just like let’s do something instead of keeping mute over the situation. Though it’s just like a drop in the ocean. In choosing the 28 companies I think one of the criteria of the CBN governor was that he looked at the companies that have the prospects to grow , expand and create employment. It was based on that. I think they had other criteria. But one thing he promised is that there will be transparency , saying they will give the names and addresses of the beneficiary campanies so that the public will know who they are and monitor them too.
He said that because in the past, he had been criticised that he was just giving free money. I think the press should try and hold them accountable, that is what is done globally.
It’s a good move of the CBN. They should so whatever they can to increase the capacity of companies by giving them the fund they need that will help in creating employment and expansion of the economy. If the govt can enable the private sector with this support, it’s a welcome developement.
Why 28 companies
The CBN is looking at hightech companies that have the capacity to grow more. It’s not necessarily small businesses that are just starting . The companies that have proven track records.
When given this money, it should positively impact the employment level . So when the funds are given and the companies don’t generate the level of employment expected , the CBN might call for a refund.
I’m okay with the CBN criteria because their target is t expand the economy and lower unemployment by building capacity of industries.
But the CBN has to make sure not to abuse it by lowering the standard for some, that is where the problem will be…
For his part, Mr Muda Yusuf- Economist and CEO, Centre for the Promotion of Private Enterprises (CPPE) argues that the CBN 100 for 100 programme is not significantly different from the earlier real sector intervention funds. It is essentially a question of sustaining an existing momentum of real sector financing by the CBN.
The first batch of 28 beneficiaries were perhaps the companies that met the criteria for the disbursement. Since it’s an ongoing intervention programme and the target is for 100 beneficiaries, there is room for more businesses to benefit.
Of course the programme is not meant to solve the financial problems of all companies in the real sector. But it is an important part of the solution to their financial challenges.
But what is becoming increasingly evident is that while financing is necessary to boost real sector growth, it is not a sufficient condition to transform the sector. Foreign exchange issues need to be addressed. The challenge of insecurity needs to be more effectively tackled, structural bottlenecks need to be fixed, investment climate issues are also very paramount.
It is thus imperative for Monetary and fiscal policy complementarity to happen. Very little progress can be made if these other factors are not reckoned with.
Also reacting, Mr Frank Onyebu, Chairman, Apapa branch of Manufacturers Association of Nigeria (MAN) said “I believe that 28, or even 100, is too small a number to make an impact, but at least it’s a starting point. The problem with starting with such a small number is that it usually leads to some sort of stampede. The resulting corruption often defeats the aim of the project in that the wrong people get enlisted.
While I commend the CBN for the initiative I would like to call for a rapid expansion of the scheme to ensure that its objectives are fully realised.
One key criterion for such a scheme would be the ability of the qualifying companies to source raw materials locally. This is to ensure that we are not just recycling foreign products.
Others include prequalifying companies’ current employment and opportunities to be created by the scheme; FX to be generated; ability to significantly contribute to national economic growth; and of course, the ability to repay the loans.”He further said “Most of these, I believe, have been captured in the context of the scheme, but like everything in Nigeria, purposeful implementation is key. What I expect the CBN to do is to disseminate the information far more aggressively than it’s currently doing to ensure that all eligible candidates are aware of the scheme. The CBN should as well ensure that the process of prequalifying and choosing candidates is transparent and above board.
Kassimu Garba Kurfi, MD, APT Securities
I think this is a wonderful initiative from the apex bank to boost the nation’s economy. However I’m a bit worried with the Mecure inclusion as I am not seeing anything relating to export except it has to do with importing healthcare equipments. However inasmuch as the apex bank’s interventions is aimed at achieving Buhari’s aspiration to lift 100 million Nigerians out of poverty, I still say there’s a whole lot to be done.
Yes, Emefiele has said the requests were carefully scrutinised but we Nigerians want to see results.
