Finance

CBN and the pursuit of inclusive growth  

COVID-19 induced recession aided by international spot oil prices dip in 2020 have left the Central Bank of Nigeria (CBN) and its leadership with no choice than to go the extra mile to nip future occurrence in the bud.

 The announcement in February by the National Bureau of Statistics (NBS) that Nigeria’s economy was out of recession turned out to be one of the cheering news that dominated media platforms, this first quarter of 2021.

 The country’s untoward experience during the period it slipped into recession, largely for the infamous COVID-19 pandemic and the drop, both in crude oil production and international spot market oil prices, put a serious strain on the fiscal and monetary authorities, tasking them to explore avenues to wrestle the economy out of the recession mode.

 In the period that the lockdown lasted, virtually all citizens and governments at the various levels lived on reserves, with tax payments and collections at their lowest levels. It was a period that left virtually all institutions and departments of government, especially the revenue generating ones in a quandary, as the pandemic brought in its wake unbudgeted huge expenses.

 It foisted on the government the challenge of how to fund and tackle the attendant health needs and medicaments required to mitigate its ravaging infections that resulted in aggravated hospitalisation and consequential deaths that followed across the country. Devastating as the pandemic was and still is, the Federal Government, through the CBN, stayed resolute and unrelenting in churning out policies that in the main have proved resilient and that have effectively turned the tide, pulling the economy back on course and on the growth trajectory once again.

 Besides the rebound in oil price fixtures in the international spot market which partly helped flipped the direction of the nation’s economy on the growth trajectory, the CBN, under its various intervention programmes, has largely contributed to the feat that resulted in turning the fortunes of the economy from negative to positive growth thereby ending the recession.

 The NBS validated this in its February 18 report, which said Nigeria posted a real Gross Domestic Product (GDP) growth rate of 0.11 per cent for the fourth quarter of 2020, which means that the country just about slipped out of recession. This was Nigeria’s first positive GDP growth rate following two consecutive quarters of contraction. 

Slim as the growth to the GDP was (0.11 per cent), the news that aggregate production of goods and services has started to look north, was all it takes to conclude that the measures so far taken by the fiscal and monetary authorities have started yielding results. The growth rate in terms of contribution to GDP, revealed that Agriculture, where CBN has consistently lent its support through the Anchor Borrowers Programme, for example,  among others, grew by 3.4 per cent,  In terms of contribution to GDP, Agriculture, Industries, and Services comprised 26.95 per cent, 18.77 per cent, and 54.28 per cent.

   Intervention schemes

 The CBN recently launched a total of eleven intervention schemes aimed at increasing access to finance by non-interest financial institutions. A circular signed by the CBN’s  Director, Financial Policy and Regulation Department, Kevin Amugo, said the overall objective of these interventions is to promote financial inclusion in the country.

 Among the various schemes are the Non-Interest Guidelines for Accelerated Agriculture Development Scheme (AADS),  Textile Sector and for the operation of the Agri-business, Small and Medium Enterprise Investment Scheme (AGSMEIS), as well as for Non-oil Export Stimulation Facility and Anchor Borrowers’ Programme.

There is one for Real Sector Support Facility and another for the operation of the Credit Support for the Healthcare Sector. These intervention schemes have been designed to meet specific purposes and objectives.

 For example, the AADS, is aimed at reducing unemployment in Nigeria by funding agriculture production initiatives that will engage as many as 370,000 youths over the next three years, while the intervention in Textile Sector is intended to resuscitate Nigeria’s textiles industry by providing a N50 billion special mechanism for restructuring of existing facilities and provision of further facilities for textile companies with genuine need for intervention.

 The CBN has further assured that the intervention schemes will continue to focus on enhanced credit delivery to critical sectors, with a view to enhancing productivity and stimulate the real sector of the economy. Driven by the need and urgency required to pull the economy out of the wood and keep if afloat, the CBN pushed through a range of critical sector interventions, including a N1 trillion COVID-19 intervention fund for manufacturers. 

CBN Governor, Godwin Emefiele, who made this known about three weeks ago, said N400 billion has already been disbursed to beneficiaries, among them, 76 manufacturers, adding that the fund has increased activity in the manufacturing sector, which he noted, has started to thrive. Emefiele noted that the manufacturing industry has been a key focus of the efforts by the monetary and fiscal authorities towards driving recovery of the economy, following the downturn in the first half of 2020, as a result of the pandemic.

 He said:”At the Central Bank of Nigeria, we set up a N1 trillion facility in April 2020 for the growth and expansion of manufacturing firms in Nigeria. So far close to N400 billion has been disbursed to 76 manufacturing firms, which would boost local manufacturing across critical sectors over the next few years,” pointing out that the CBN’s efforts have aided the recovery of the manufacturing sector as reflected in the Purchasing Managers Index which shows that the index on manufacturing activities rose from a low of 42.4 points in May 2020 to 48.7 points in February 2021. 

 The CBN chief also alluded to the multiplier effects of the intervention with respect to the Small and Medium Enterprises. As he put it: “The impact of a manufacturing plant also goes beyond its immediate environment, as it also enables the growth of SMEs that work to meet the needs of the manufacturing plants and the staff. This is in addition to the skills transfer gains that could be made when our people are able to acquire knowledge on new technological skills.” 

Aside manufacturing, the CBN also increased by 100 per cent, the  N150 billion  Targeted Credit Facility (TCF) being accessed by households and small and medium enterprises affected by the pandemic to N300 billion. The expansion of the credit line, the apex bank said, was to enable it reach more households and small businesses raved by pandemic. 

The TCF funds  are already being disbursed  through the NIRSAL Microfinance Bank. Emefiele said about N149.21 billion of the fund has been disbursed to 316,869 beneficiaries, stating that the TCF was designed to cushion the adverse effects of COVID-19 on households and small and medium businesses. The scheme was to support households and small and medium businesses to expand their productive capacity through equipment upgrade, research and development.

 The CBN chief said the modality for the loan disbursements was based on the activity, cash flow and industry size of the beneficiaries. Each eligible small business , he said, can receive a maximum of N25 million while qualified households can access a maximum of N3 million each, adding that the fund was jacked up  ” to accommodate many more beneficiaries and boost consumer expenditure which should positively impact output growth.

 Given the impact on COVID-19 on key economic variables earlier mentioned, the fiscal and monetary authorities took unprecedented measures to prevent any long-term damage to the growth prospects of our economy,” he said. 

In addition, Emefiele said there is  one-year extension of the moratorium on principal repayments for CBN intervention facilities and regulatory forbearance was granted to banks to restructure loans given to sectors that were severely affected by the pandemic. He said the CBN has also strengthened the Loan-To-Deposit Ratio policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers. In this regard, total gross credit rose by over 21 per cent over the past year from N15.5 trillion to N19.54 trillion.

 Creation of N15tr Infrastructure Company

 The establishment of the N15 trillion Infrastructure Company (INFRA-CO), is another landmark initiative of the CBN aimed at turning the economy around from its bashing by the ripple negative effects of the pandemic. The Infra-Co vehicle would enable the use of private and public capital to support infrastructure investment expected to have  multiplier effects on growth across critical sectors.

 The Infra-Co which is billed  for take-off in the second quarter of this year, has a combined debt and equity  capital of N15 trillion, and will be managed by an independent infrastructure fund manager. The dedicated privately-managed infrastructure and industrial vehicle will harness opportunities for Nigeria’s infrastructure development by originating, structuring, executing and managing end-to-end bankable projects in that space. Besides the CBN, its other promoters include the Africa Finance Corporation (AFC) and the Nigeria Sovereign Investment Authority (NSIA).

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