As the central bank and apex monetary authority of the country, the major
regulatory objectives of the Central Bank of Nigeria (CBN) as mirrored in
the institution’s enabling Act are to maintain the external reserves of
the country, promote monetary stability, a sound financial environment and
to act as a banker of last resort.
In this strategic turf of central banking, the establishment must adroitly
read and proactively react to a laundry list of fluid scenarios, which
include geopolitical and trade tensions that unquestionably impact the
dynamics of global trade. These strains often spawn threats to
macro-economic stability and even the monetary policy footing of the
nation.
For instance, a combination of factors, including financial market
volatilities, trade war between the US and key allies, continuing monetary
policy normalization by the US, BREXIT, the termination of the European
Central Bank’s (ECB) asset purchase programme in December 2018 and the
slowdown in the Chinese economy, has further heightened uncertainties for
the global economy in 2019. Consequently, global growth has been
downgraded by the IMF to 3.5 per cent in 2019 from 3.7 per cent in 2018.
To manage this seismic environment requires a bold, well-informed and
experienced administrator on duty. Tossed in the circumspect engagement
with aggravations seeded by rising tendencies and incidences of
protectionism, new nationalism and anti-globalisation – especially in the
western hemisphere – it’s then clear that greenhorns have no business in
the apex bank’s command room.
No less a juggler’s nightmare, among other critical regulatory
responsibilities, tracking monetary-cum-fiscal policy parameters in the
turbulent sea of financial world and making delicate adjustments as
necessary with the ship of state steaming at full speed requires no less a
navigator with adroit multi-tasking skills and a cool head. Leadership
continuity at the helm is also crucial to avoid the consequences of
changing captain mid-voyage.
It is to this complex, fluid turf of apex banking, that the CBN Governor,
Mr. Godwin Emefiele, CON, has brought over three decades of both
theoretical and practical experience from top-flight academic and hands-on
banking turfs to. In a change regime, Emefiele has admirably deployed
governance skills groomed in the stern, high-octane financial industry, in
effectively driving CBN’s command room these past five years.
To critical industry stakeholders, this unassuming banking sage certainly
deserves kudos for keeping faith and demonstrating uncommon commitment and
professionalism in a particularly challenging period of the national
journey. Governor Emefiele’s track record of remarkable performance at the
nation’s apex bank strongly recommends the renewal of his tenure by the
federal government.
Logic and reason reinforce this position. As of June 3, 2014 when Emefiele
assumed office, Nigeria’s reserves had fallen from a peak of US$62b in
2008 to US$37b! But following the sharp drop in crude oil prices, the
nation experienced a plummeting of the CBN’s monthly foreign earnings from
as high as US$3.2 billion to as low as US$700 million monthly. To avoid
further depletion in the reserves, the CBN took a number of countervailing
actions including the prioritization of the most critical needs for
foreign exchange.
In this regard, and in order of priority, it decided to provide the
available but highly limited foreign exchange to meet important needs such
as matured letters of credit from commercial banks, importation of
petroleum products, importation of critical raw materials, plants, and
equipment, payments for school fees, BTA, PTA and related expenses.
Over the intervening period, it is heartening to note that these policies
yielded positive results. In particular, the CBN managed to stabilise the
exchange rate around February 2015, thereby creating certainty for both
household and business decisions. It largely eliminated speculators and
rent-seekers from the Foreign Exchange Market.
Reserves, despite having fallen, were still robust and able to cover about
five months of Nigeria’s imports as against the international benchmark of
three months. The domestic production of items prohibited from the Foreign
Exchange (FX) market is picking up nationwide, thereby creating more jobs
for many more Nigerians.
The demand for foreign exchange by mostly domestic importers has risen
significantly. For example, the last time the nation had oil prices at
about US$50 per barrel for an extended period of time was in 2005. At that
time, the average import bill was N148.3 billion per month. In stark
contrast, Nigeria’s average import bill for 2015 was over N1 trillion
monthly, though oil prices are now less than US$60 per barrel but picking
up.
The net effect of these combined forces unfortunately is the depletion of
the nation’s foreign exchange reserves. The stock of Foreign Exchange
Reserves had declined to around US$25.4 billion.
Further, as part of its long-term strategy for strengthening the Nigerian
economy, the Central Bank established specific initiatives to resolve the
underlying factors goading challenges to long-term GDP growth, economic
productivity, unemployment and poverty that had pervaded the economy over
the past decades. Measures were taken to increase credit allocations to
pivotal productive sectors of the economy. This is with a view to
stimulating increased output in these sectors, creating jobs on a mass
scale and significantly reducing import bills.
These targeted interventions have so far impacted such sectors as
agriculture, power, micro, small and medium-scale enterprises (MSMEs),
workers’ salary/pensions assistance fund, infrastructural assistance for
states, emergency fiscal spending, improving FX supply and financial
inclusion
This week, Emefiele, during a meeting with textile manufacturers and
cotton farmers, announced the inclusion of textile products on the long
list of items restricted from foreign exchange (FX) for import into the
country. The restriction order, which takes immediate effect, has brought
the number of such items to 44. It could be recalled that earlier this
year, cement and tomatoes paste were added to the list.
His words: “Effective immediately, the CBN hereby places the access to FX
for all forms of textile materials on the FX restriction list.
Accordingly, all FX dealers in Nigeria are to desist from granting any
importer of textile material access to FX in the Nigerian foreign exchange
market. In addition, we shall adopt a range of other strategies that will
make it difficult for recalcitrant smugglers to operate banking business
in Nigeria.”
He explained to his rapt audience why textile products had to be included
on the forex restriction list: His words: “Today, Nigeria currently spends
above $4 billion annually on imported textiles and ready-made clothing.
“With a projected population of over 180 million Nigerians, clearly the
needs of the domestic market are huge and varied, with immense prospects,
not only for job creation, but also for growth of the domestic textile
industries.
” A quick example that highlights the potential of this local market is
the need to support the provision of uniforms and clothing apparels for
school students, military and paramilitary officers as well as workers in
the industrial sector.”
All these policy measures by the Emefiele-led CBN were conceptualized and
deployed in boosting the Nigerian economy and aiding the economic
transformation effort of the Muhammadu Buhari administration. Little
wonder, the emerging consensus is that to sustain CBN’s nimble governance
trajectory under Emefiele’s nous and vision, continuity is key.
* Ojeifo contributed this piece from Abuja via ojwonderngr@yahoo.com
Sufuyan OjeifoEditor- in- ChiefThe Congresswatch Magazine+234 8034727013
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