CBN interventions and Nigeria’s Ailing economy

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Falling oil price, weakened naira and the coronavirus pandemic have driven Nigeria’s economy to the precipice, thus forcing the country’s apex bank, Central Bank of Nigeria, to intervene in almost every sector of the economy. In this report, BENJAMIN UMUTEME takes a look at how these interventions have impacted on the economy.

As the number one oil producing country in Africa, Nigeria’s economy have seen many boom and bust period which has adversely affected economic growth.

And with falling oil price, a weakened naira and the coronavirus pandemic have driven the country’s economy to the precipice. This has resulted to interventions in the economy by various organs of government, and most especially the Central Bank of Nigeria (CBN).

Falling government revenue has resulted to its inability to meet its obligation to the citizenry. This has forced the Central Bank to go out of its core mandate to intervene in various sectors ranging from agriculture to manufacturing, aviation and the power sector.

CBN’s mandate

The mandate of the Central Bank of Nigeria (CBN) is derived from the 1958 Act of Parliament, as amended in 1991, 1993,1997,1998,1999 and 2007. The CBN Act of 2007 charged the Bank with the overall control and administration of the monetary and financial sector policies of the federal government.

The objective of the CBN includes ensuring monetary and price stability; issue legal tender currency in Nigeria; maintain external reserves to safeguard the international value of the legal tender currency; promoting a sound financial system in Nigeria; and act as banker and provide economic and financial advice to the federal government.

Consequently, the bank is charged with the responsibility of administering the Banks and Other Financial Institutions (BOFI) Act (1991), as amended, with the sole aim of ensuring high standards of banking practice and financial stability through its surveillance activities, as well as the promotion of an efficient payment system.

In addition to its core functions, CBN has over the years performed some major developmental functions, focused on all the key sectors of the Nigerian economy (financial, agricultural and industrial sectors). Overall, these mandates are carried out by the Bank through its various departments.

With its various interventions, analysts continue to insinuate that the apex bank is gradually taking over fiscal duties in addition to its monetary duties. This they say is stretching the Bank.

Why interventions?

Nigeria slipped into recession in 2016, but promptly exited by 2017, it was due partly I’m part to key interventions by the Central Bank which had to bear the responsibility of keeping the economy going. And it is obvious that these Interventions minimised the impact the recession would have had on Nigerians.

And when the coronavirus pandemic hit the world suddenly, with Nigeria not being an exception the CBN was once again called to duty and it has responded in various ways through interventions.

Speaking during the 2020 virtual conference for Finance Correspondents and Business Editors with the theme: ‘Covid-19 pandemic: Turning challenges into opportunities,” last week the director, Development Finance, CBN, Mr. Yila Yusuf, who disclosed this over the weekend, said the interventions by the bank has helped to lessen impact of decline in economic activities occasioned by reduced foreign exchange.

According to him, the interventions have not only led to increase in local production it also generated jobs.

In a chat with Blueprint, an economist, Friday Efih, said the CBN was doing a yeoman’s job. He noted that as it seems the apex bank has become both a monetary and fiscal authority.

“I must commend the Central Bank for various interventions in different sectors of the economy. Each time read of interventions by the CBN, I wonder whether what the federal government is doing? If the federal government has been doing what it is suppose to do, the CBN would not be digging it’s hand in everything,” he said.

Getting value for money

The CBN,  in its bid to ensure that businesses across all sectors of the economy sustain their operations in the aftermath of the Covid-19 pandemic, and even before, introduced several loan opportunities and fund interventions. They include the Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS), Loan For SME’s And Agricultural Businesses Without Collateral, Anchor Borrowers Programme (ABP) Intervention for Agriculture, Accelerated Agricultural Development Scheme (AADS Loan), MSMEDF Loan – Micro, Small and Medium Enterprises Development Fund, Creative Industry Financing Initiative (CIFI Loan) and the CBN Healthcare Research And Development Grants.

A breakdown of interventions showed that in the wake of the Covid-19 pandemic, amounted disbursed by the CBN has risen to N3.5 trillion. This includes, N216.87 billion to the real sector; Covid-19 Targeted Credit Facility (TCF)-(N73.69 billion); AGSMEIS-(N54.66 billion); Pharmaceutical and Health Care Support Fund-(N44.47 billion); and Creative Industry Financing Initiative-(N2.93 billion).

However, a development specialist, Jaye Gaskia, said the result on ground “does not tally with the quantum of funds released.”

He told Blueprint Weekend that if the funds actually get to the right people that they are meant for and used for what they are meant for, we are not suppose to be in the mess we are in now.

“Under this administration, the government through the CBN has spent N1.7 trillion I the power sector as intervention. And we are not seeing any improvement in the sector, very little in return for all that have been sunk in the sector,” he said.

Impact of interventions

Of all of its interventions, the CBN has recorded more success from the Anchor Borrowers Programme (ABP). Its outstanding success has helped to reduce the nation’s food import bills and boosting the income levels and financial capacity of local farmers.

At the last count, 200,000 smallholder farmers from 29 states of the federation are already benefitting from the N43.92 billion released through the CBN and 13 participating financial institutions to fund the agricultural programme.

As at October 2018, 2.5 million direct jobs had been created through implementation of the Anchor Borrowers’ scheme, according to President Buhari. About 1 million more indirect jobs are believably created also. A total number of 862,069 farmers cultivating about 835,239 hectares of land, cultivating 16 different commodities including Rice, Wheat, Maize, Cotton, soya-beans, Poultry, Cassava and Groundnuts, tomato, in addition to fish farming had already benefited from the programme. The initiatives were undertaken in close collaboration with the states.

Accordingly, over seven million 50Kg bags of fertiliser have been produced through the CBN intervention programme. “Eleven blending plants with a capacity of 2.1 million metric tons have been reactivated. We have saved $150 million in foreign exchange and N60 billion in subsidy. Fertiliser prices have dropped from N13, 000 per 50Kg bag to N5, 500,” President Buhari is quoted to have said.

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