With no fewer than 37 interventions, the Central Bank of Nigeria, CBN, under Godwin Emefiele, is a busy bee. Aside its core mandate of minding the fiscal policy of the national economy, CBN has driven its foot into agriculture, energy, infrastructure, healthcare, creative industry, micro, small and medium enterprises (MSMEs) etc.
CBN has featured in virtually all aspects of the nation’s economy. This triggered a question from a colleague recently. While having a conversation on the nation’s economy and how several experts (Nigeria has a rich pool of experts, both genuine and delusional) have tinkered with the economy, yet it still gasps for breath; the discussion tailed into the actions and inactions of CBN. At this point, a colleague asked: what does CBN really want? It was not a rhetorical question. He asked, anticipating an answer. And he got multiple answers, all streaming from different directions from almost every member of the small group of peers having a fellowship over steaming goat meat and fish pepper soup at a shebeen in this part of Ikeja, Lagos, from where you could effectively take census of aircraft landing and taking off from the airport.
Because of the high calibre of the questioner and the manner he took all the answers almost in disbelief, it dawned on me that there is a crisis of understanding on what the apex bank wants to achieve with its many interventions. And it got me wondering, if a colleague, an award winner of many years of practice and experience in journalism, is finding it difficult to connect the dots in the interventions of CBN, then what do we make of the understanding of the ordinary Nigerians, the real rabble whom most of the initiatives of CBN were targeted at, to pull them out of poverty and despair.
Let’s be clear. The core duties of the CBN going by the letters of the CBN Act are: to maintain the external reserves of the country, promote monetary stability and a sound financial ecosystem, and to act as a banker of last resort and financial adviser to the Nigerian government. The bottom line is that the CBN should at all times ensure that the nation’s economy is in good health; healthy enough to support growth in all sectors, boost local production, create jobs and opportunities, support critical infrastructure and stimulate a robust export-driven economy. Essentially, these are the primary responsibilities of all reserve banks (Central banks) across the world, all things being equal.
But all things are not equal in Nigeria. Here is a peculiar nation, populated by peculiar people with a lifestyle so peculiar, you would think the citizens landed from outer space. The lifestyle of the people both as a nation and as individuals is so grotesquely paradoxical that it tends to unreal. Just a few examples. Among the OPEC and OPEC+ nations, Nigeria is the only country that supplies raw materials usually at very cheap prices to other countries and imports from them finished products from the same raw materials, this time at very high prices. Nigeria has a huge crude oil reserve so much so that all domestic petroleum product needs – petrol, diesel, LPG (cooking gas), kerosene, et al – can be met locally but the authorities would rather import finished products than process the abundant raw crude. Nigeria flares gas at very high volume (though it’s been declared illegal since 1984), the second highest gas-flaring nation in the world after Russia, yet the country has no stable electricity. Whereas the flared (wasted) gas could have been converted to electricity, the authorities prefer to waste it and constrain the people to look to generators as alternative source of electricity.
Nigeria has a huge deposit of coal in Enugu. It was at a time a reliable source for electricity. It was abandoned for hydrocarbon when the nation migrated to dependency on crude oil. The vast coal reserves are still there, untapped. China and Australia still rely on coal as part of their electricity throughput. Nigeria ought not to have abandoned the coal option. But it’s not too late to return to coal to complement hydrocarbon.
These are a few of the niggling ironies and contradictions. This is what CBN wants: to make the country return to the path of production and dissipate energy on local production. This is what drives Emefiele and his CBN: to wean the nation from the craze to import basic things that could easily be produced here.
Year-on-year, the import-export balance sheet is skewed against Nigeria. In Q1 of 2020, export spend was N2.907 trillion (29.79%) at a time import spend was N6.850 trillion (70.21%) of total trade. It simply means that the farmer is not able to grow enough food to feed his household. This is largely the reason CBN is reeling out interventions as short term/long term reactions to exigencies. In the course of time, Emefiele has dared the cabal of importers; he has deflated the tyres of merchants of imported rice, wheat, beans, millet, among others in his quest to run a people-centric CBN and a financial system that works for the average Nigerian and not one that works against them.
Already, some of these interventions are paying off. In 2020, five years after the Anchor Borrowers’ Programme (ABP) in agriculture was introduced, the volume of rice Importation remarkably decreased for the first time in 20 years, according to the Foreign Affairs Service (FAS) of the United States Department of Agriculture (USDA) in its August 2020 report. The National Bureau of Statistics, NBS, also reported a jump to 85.36% in agricultural goods export for Q1 (2020) compared to 46.76% in Q1 (2019). There is a direct link between this and the ABP which has witnessed a huge leap in the entire value chain. The increasing number of rice millers, for instance, in Ebonyi, Kano and Kebbi states attests to the success of the ABP intervention.
It therefore stands to reason that CBN interventions are not only necessary but inevitable as they are triggered by a need or exigency. In Nigeria, entrepreneurs are encumbered by three major drawbacks, namely: lack of appropriate financing products / services; apathy of banks to finance certain critical sectors/segments, like agriculture, MSMEs; and inability of borrowers to present usable collateral to banks as comfort for loans. These three factors have circumscribed the capacity of entrepreneurs to expand their frontiers of productivity. CBN’s interventions are therefore targeted at expanding the frontiers of local production; bridging need gaps created by unforeseen circumstances (like the Covid-19 pandemic).
CBN interventions are reactions to market failures. To fully appreciate the impact of such interventions, let’s for a moment assume that CBN did nothing in all the cases that triggered its interventions. The impact of such ‘do-nothing’ approach on national economy is simply unimaginable.