• Say CBN freezing of culprits’ accounts will boost diversification drive
Real sector operators and the banking industry have rallied support for the recent clampdown of smugglers by the Central Bank of Nigeria (CBN), as it prepares to freeze the accounts of importers engaged in the importation of banned items into the country.
Speaking separately in a telephone interview with The Guardian, yesterday, the groups said the latest move by the CBN will not only boost the Federal Government’s economic diversification drive, but also jumpstart moribund industries in the manufacturing and agricultural sectors, especially in the areas of textiles, palm oil, and rice milling.
Specifically, the Director-General, Manufacturers Association of Nigeria (MAN), Segun Kadiri, who expressed the group’s full support for the CBN policy, also noted that “one of the most important avenues for achieving economic diversification is manufacturing.”
To this end, Kadiri said the manufacturers “welcome any government’s effort that is aimed at boosting this mission and making it a reality. It’s been an objective that government has been pursuing, but bringing it into reality by supporting the monetary policy on the side of CBN is very welcome.”
He continued: “It (diversification) is also something that MAN has been committed to in terms of ensuring that we have an economy that is industrialised, and that we are able to contribute to the gross domestic product (GDP), and to the foreign exchange (forex) earning of government by producing for export, and also ensuring that what we import can be produced locally.”
Agreeing, the President, the Chartered Institute of Bankers of Nigeria (CIBN), Uche Olowu, like the CBN Governor, Godwin Emefiele, described smugglers/importers of banned items as “economic saboteurs and must be treated as such.”
Noting that CBN freezing of culprits’ accounts may seem draconian; Olowu argued that such a measure is necessary, as it will serve as a deterrent to the flouting of the policy.
He said: “For me, the problem of our country is consequence management, because if you are a smuggler, you are simply a saboteur of the economy. This also depletes the scarce foreign exchange we have to import items that can be produced here.
“If CBN takes the war to where they have fear of control, I think it is one of the best things that could have happened, because it means that if anyone is caught doing that, you will be banned from having access to funds and that is a very good measure. This will also act as a deterrent, because it will make people to understand that smuggling is an anathema to the Nigerian economy, so I’m in total support of it.
“It may sound draconian, but because there are no serious consequence management that’s why we are where we are today. Importation creates foreign jobs, so the importers or smugglers of banned items are economic saboteurs and should be treated as such.”
CBN Governor, earlier in the month, had warned that the bank will block the accounts of smugglers sabotaging Nigeria’s economy in the textile, rice, and palm oil sectors, and even go further to name and shame the culprits, who are not only encouraging capital flight from the economy, but also stifling economic activities and attendant massive job losses.
With regard to the impact of the policy, Kadiri said this will encourage manufacturers to scale up their capacities, especially in the affected sectors, adding that it will “create the needed space for local manufacturing and local production to fill in the gaps and jump start the industries.”
Kadiri, however warned that CBN interventions alone cannot jump start economic diversification as other regulators and government agencies, particularly from the fiscal end must support such moves for holistic results.
This, he said, is because “the problem is multifaceted, and CBN will do its bit in terms of using monetary measures to achieve set objectives. I believe that previous measures in the past have impacted, although there is still room for improvement because the problems are enormous. If you have some items that have been banned from importation, but if you have players in the economy that continue to subvert the system and bring those items in, such punitive measures should be taken against them to hurt trade.
“Essentially, the CBN actions alone will not be sufficient to take them out, but it is a good step and every other regulatory agencies and institutions of government should follow suit, so that in a concerted manner, we will be able to defeat their (smugglers) activities.”
Contributing, Olowu noted that beyond complementarity, the CBN has even gone monetary policies of interest and exchange rates monitoring to development financing and some fiscal interventions to get the economy on the right path and attract foreign direct investment to uplift the economy.
“So, it is a no brainer that fiscal policy and monetary policy must always complement each other. Monetary policy regulates the interest and exchange rates, but the fiscal side deals with the excise duty, taxes and all that. For quality check of these nuances, and for a very healthy economy, there must be complementarity of both,” he added.
Kadiri argued that lack of support from other agencies is frustrating manufacturers’ ability to take full advantage of all the CBN interventions, as these should not be taken as a silver bullet solution. “There is a need for these to be complemented by other agencies, especially Customs for instance; because if smuggling continues unabated, it is very easy to see that this will have very little impact.
“The influx of these imports narrows our space for operations, especially as they are smuggled, so they don’t pay the right duties, and they are sold in the open market. They tend to crowd out the locally-manufactured ones, because they will come in and unfairly compete in terms of price.
But if they are taken out or their activities actively degraded to the barest, it will help to boost our sales. As you’re aware, our warehouses are full with unsold inventory, and that’s because we have goods from outside the country brought in such unwholesome manner and coming in to compete with the local ones. If they are taken out it will create more room for our members to boost their sales.”
He cited the textile industry, which has been the most-affected by imported items, even as there have been many measures to boost the industry’s performance. Recall that recently, the CBN introduced some measures to boost the textile industry virtually along all the value chain in the sector, so this will complement it, apart from boosting their capacity, it will continue to operate and it will retool and so on. Now it is moving on to ensuring that the market place is also available for them to operate. So the CBN measures are a plus.”
He equally admitted that as members of the Tariff Technical Committee, manufacturers have had some beneficial fiscal policies, and urged strict enforcement of the 2019 fiscal policy “to ensure that the local industries are not exposed to unfair competition from foreign goods, especially those from foreign third world countries, where we do not have restrictions of regional agreements.”
Earlier in March, the CBN had announced new measures to revive Nigeria’s moribund industry estimated to worth $10billion. Such measures included financial support to manufacturers at single digit rate, to refit, retool and upgrade their factories to enable them produce high quality textile materials for the local and export markets.
Announcing the measures, Emefiele had said: “We shall, initially support the importation of cotton lint for use in textile factories, with a caveat that such importers shall begin sourcing all their cotton needs locally beginning from Year 2020. As part of its Anchor Borrowers Programme, the CBN will support local growers of cotton to enable them meet the needs of the textile industries in Nigeria.
The CBN shall also support efforts to source high-yield cotton seedlings so as to ensure the yields from our cotton farmers meet global benchmarks. As regards provision of stable electricity, the CBN shall support the creation textile production centres in certain designated areas in Nigeria where access to electricity shall be guaranteed.”
In regards to financial support, CIBN’s Olowu denied allegations of collusion by banks in funding smuggling, saying, “Rather than collusion by banks, what happens is that importers or smugglers can source for funds from other sources and transfer to their banks. So it is not really that banks are colluding with them. This is why this latest CBN move is for the interest of the economy, as well as for public interest.”
He insisted that “banks will support any monetary measure that will boost economic activities. Get it right, the banks won’t support illegal imports because such imports won’t add value to the economy, and CBN will not approve it and banks will be sanctioned if they process the Form M for import of banned items.”Beyond all the interventions, Kadiri insisted that all that is need now is for locally manufactured goods to be competitive in both the local and international markets.
As he noted, “even if we are able to scale capacity, and able to block the accounts of importers of banned goods, if we are not able to produce competitively, to be able to bring down our cost, to have reach to the markets, we will still be challenged. We are talking about infrastructure challenges like power, we’re talking about taxes both officially and unofficially, we are also talking about regulatory lapses. All of these have to work together to ensure that the environment is conducive enough for us to produce competitively.”
Besides, he added, “It is also important for Nigerians to support the process by patronising locally-made goods, and that way you will put the importers out of business, especially if they’re not the ones that are cloning our members’ products.”
Against this backdrop, Olowu noted that it will take a while before the economy can feel the full impact of the various government interventions to advance productive activities, because the gaps are huge, so all that the CBN is doing appears like a drop.
“But with consistency, you will start to see and feel the impact like in the rice revolution. Now, they are going to the palm oil sector, and soon we will also begin to see impact in that area. Policy impact takes time, so I won’t say the real sector operators are not taking advantage, because the problem is huge and every measure put in place appears to just scratch the surface.” He therefore charged the media to create awareness on these interventions, to enable operators take better advantage of them.