By Chinwendu Obienyi
“In the course of revamping the economy, we made some difficult choices, most of which yielded the desired results. Some of the measures led to temporary pain and suffering for which I sincerely apologised to my fellow countrymen, but the measures were taken for the overall good of the country”.
These were the words of the out-going President, Muhammadu Buhari during a national broadcast on Sunday.
Indeed, the past 8 years of President Muhammadu Buhari in office have been characterised by sundry micro, macroeconomic policies and funding initiatives aimed at strengthening all the institutional and legislative mechanisms for the purpose of reversing the economy’s recessionary trend and positioning it on the part of sustainable growth.
Apart from the yearly budgets that spelt out in clear terms the economic projections of the administration for the economy, including the Medium Term Expenditure Framework (MTEF), as well as other policy frameworks, others like the Economic Recovery and Growth Plan (ERGP), debt management plans, the Treasury Single Account (TSA), have been churned out by the government as templates for various policies and programmes’ implementation to alleviate poverty, address unemployment, insecurity and other socio-economic problems.
However, under the Buhari-led administration, the banking sector witnessed aggressive policy redirection following the Central Bank of Nigeria (CBN)’s effort towards ensuring macroeconomic and financial system stability, as well as effort to spur growth through development finance interventions.
The CBN became even more visible in its effort geared towards supporting job creation, reducing the high level of Treasury Bill rates, improving access to credit for MSMEs, deepening the intervention programmes in the agricultural sector, building a robust payment system infrastructure that will help drive inclusion, in addition to key macroeconomic concerns such as exchange rate stability, financial system stability and maintaining a strong external reserve.
Given Nigeria’s dependence on crude oil revenues for close to 86 per cent of its forex earnings and over 60 per cent of government expenditure, the drop-in prices led to heightened inflationary pressures, depreciation of exchange rate, significant drop in external reserves, and eventually, a recession set in during the second quarter (Q2) of 2016.
Concerted effort by the monetary and fiscal authorities led to the recovery of the economy from recession by the first quarter (Q1) of 2017. Building on these efforts, the external reserves rose from $23 billion in October, 2016, to over $45 billion by June, 2019. Inflation dropped from 18.72 per cent in January, 2017 to 11.98 per cent in December, 2019.
With improved inflow of forex, the naira exchange rate has remained stable around N360/$1 for over 38 months until the recent technical devaluation in the face of the COVID-19 pandemic.
The monetary authorities also opened the investors and exporters window which allowed exporters and investors to inflow and sell their forex at the prevailing market rate, as well as closed access to forex on 43 items, while deploying intervention funds to support growth and productivity in the agricultural and manufacturing sectors.
Similarly, the CBN deployed several measures to support the government’s ERGP implementation, including the tightening of the monetary policy rate in order to rein in inflation as policy directives to the commercial banks on improved lending to key sectors of the economy.
The CBN launched the Anchor Borrower Programme (ABP) with a view to improving access to finance for over one million small holder farmers to improve cultivation of rice, tomatoes, fish, cotton and palm oil.
It also deployed other intervention facilities such as the Commercial Agricultural Credit Scheme (CACS) and the Real Sector Support Fund (RSSF). These funds were used to channel single-digit interest loans through the Deposit Money Banks (DMBs) and other participating financial institutions to beneficiaries.
Another initiative worthy of mention is the apex bank’s directive to the DMBs requiring them to increase their Lending to Deposit Ratio (LDR) to 65 per cent as part of effort to improve lending to needy sectors.
In 2019, CBN noted the appreciable growth in the industry’s growth credit, which increased by N829.4 billion or 5.33 per cent from N15.56 trillion at the end of May, 2019 to N16.39 trillion as at September 26, 2019, following its directive on the LDR policy initiative.
Commenting on the Buhari administration’s monetary policies over the past 8 years, Damilare Asimiyu, an economic and investment research analyst at GTI Capital, said, “The monetary authority has well-stated policy focus and strategy to achieve it.”
Despite this, the finance expert noted that the focus of the CBN was faced with lots of bottlenecks adding that the fiscal authorities failed to align with the monetary policies thereby mitigating the positive impact of the monetary policy measures on the economy.
He explained that, “For instance, the CBN is currently trying to grow the economy through an expansionary policy targeted at increasing capital flows (or credit) to the real sector of the economy, but the fiscal authorities on the other hand are raising taxes on many items that affect the activities of the real sector players.”
On the other hand, the National Coordinator, Progressive Shareholders Association of Nigeria, Boniface Okezie, noted that rather than progressing, the economy regressed.
Okezie also said that the policies from the CBN though helped but some of the policies were not well implemented.
“The CBN didn’t help the cause of the economy per se. In the beginning, they started well but their policies were not well implemented and so this took a toll on the economy. Also, the monies collected from banks over the period was really much and that affected dividends year in, year out. This is why this new administration needs capable hands, not putting square pegs in round holes. It is time to start doing things rightly”, he said.