Why interventions are not quick fixes of structural gaps
CBN insists policy option is potent, saves $21b in food imports
It is not going to be a journey as usual for banks, companies and individual operators behind activities aimed at undermining the extant policy on the 41 items banned from accessing foreign exchange at the official window, as it is now declared economic sabotage.
For the apex bank, beside the immediate prosecution, which is being finalised in collaboration with the Economic and Financial Crimes Commission (EFCC), culprits would not be banked by any financial institution in the country for unspecified period.
Meanwhile, a mix of inadequate infrastructure base and time lag needed for investments in capital items to mature, has remained a setback to the quest to raise the nation’s productive capacity, which is expected to reduce the huge import dependence and increase domestic growth.
Besides, the long entrenched attitude of importing virtually everything, despite the assessed capacity to produce locally, has continued to affect the productive base of the country, which currently, is being corrected with several monetary policy decisions.
Urging critics to avoid being hasty in condemnations of policies and conclusions, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said as some policies take time to bear fruits.
According to him, an understanding of the nature of ongoing domestic imbalances showed that the country’s vulnerability to global shocks came from diminished productivity due to a low and inadequate infrastructural base, with over-dependence on imports for both capital goods and consumables.
Delivering his keynote address at the Bankers Dinner, organised by the Chartered Institute of Bankers of Nigeria (CIBN), he affirmed that there is ongoing efforts by the fiscal authorities in constructing critical roads networks and rail lines aimed at reducing costs of doing business in Nigeria and opening up new markets for farmers, traders and manufacturers.
Emefiele said policy sustenance is necessary now, given the successes that have been recorded so far through the implementation of the foreign exchange policy on 41 items.
“The remarkable success that has been achieved in stimulating domestic production of goods such as rice, cassava and maize, as a result of the restrictions placed by the CBN on access to forex for 41 items, the CBN intends to vigorously ensure that this policy remains in place.
“Additional efforts would be made to block any attempts by unscrupulous parties, both individuals and corporates, that intend to find other avenues of accessing forex, in order to import these items into Nigeria.
“The CBN’s Economic intelligence and Banking Supervision Departments will work very hard with the EFCC to expose and sanction any, bank, company or foreign exchange operator that colludes with unscrupulous individuals/companies to undermine the policy on 41 items.
“Such sanctions will include, but not limited to prohibiting the banks from maintaining any bank accounts for such institutions or persons in Nigeria,” he said.
According to him, many entrepreneurs are taking advantage of this policy to venture into the domestic production of the restricted items, with remarkable successes and great positive impact on employment.
He said the dramatic decline in the country’s import bill and the increase in domestic production of these items attest to the efficacy of this policy, noticeably, the steady declines recorded in monthly food import bill from $665.4 million in January 2015, to $160.4 million as at October 2018.
“This is a cumulative fall of 75.9 percent and an implied savings of over $21 billion on food imports alone over that period. Most evident were the 97.3 per cent cumulative reduction in monthly rice import bills, 99.6 per cent in fish, 81.3 per cent in milk, 63.7 per cent in sugar, and 60.5 per cent in wheat.
“We are glad with the accomplishments recorded so far. Accordingly, this policy is expected to continue with vigor until the underlying imbalances within the Nigerian economy have been fully resolved,” he added.
Similarly, the bank’s chief has insisted that its measures taken had an impact on inflation, leading to exit from recession, with short term positive growth outlook and a projection of 1.8 per cent growth for 2018.
Emefiele said that though the growth has been sluggish and the yearly projection is low, but the economy has sustained the growth trajectory for several quarters, adding: “Following a period of rising inflationary pressure, which peaked at 18.7 per cent in January 2017, the Nigerian economy witnessed eighteen straight months of disinflation.”
He said that activities in the manufacturing sector also witnessed significant improvement between August 2016 and August 2018, as the Primary Manufacturing Index rose from a low of 42 per cent in August 2016 to 57 per cent in August 2018. This development was attributed to sustained supply of foreign exchange and stability of the naira.
“We were also aware that in order to ensure sustainable growth, efforts must be made to address factors that constrained the growth of businesses in Nigeria. This led to the set-up of the enabling business committee, chaired by the Vice President.
“CBN and the committee have worked together to improve access to credit for underserved Nigerians, through the set-up of a National Collateral Registry and the passage of the Credit Bureau Act.