Pathway to Macroeconomic Stability

James Emejo writes on the latest push by the Central Bank of Nigeria to strengthen the industrial sector, which has been struggling to find its feet in recent times

Recently, the CBN Governor, Mr. Godwin Emefiele, in matching words with action, formally inaugurated the much-anticipated funding initiative aimed at boosting the country’s industrial capacity by stimulating output production.

At the unveiling of the first cycle of the recently announced 100 for 100 Policy for Production and Productivity (PPP) initiative, the apex bank had presented cheques valued at N23.20 billion to 28 companies whose projects had been selected for funding.

Emefiele had last year introduced the policy under which eligible companies in priority sectors will be screened and 100 companies will be selected to receive funding from the CBN every 100 days, beginning from November 1, 2021.

The CBN governor, pointed out that the disbursements, which are loans that must be repaid by the beneficiaries, followed due screening of the applications received, adding that the projects, valued at N23.20 billion, comprise 14 in the manufacturing sector, 12 in the agricultural sector, and two in the healthcare sector.

Ailing industrial sector

It is evident that all is not well with the country’s industrial sector and all efforts by the fiscal authority to revive the sector had only been in theory and often politicised. With an unfavourable investment climate, which had sent major manufacturing firms exiting the country, no doubt the negative impact had been telling on the nation.

Once, an economic fortress, the real sector, until recently, is arguably a shadow of itself, plagued by sundry challenges, unable to contribute meaningfully to growth.

Before the advent of oil, the real sector, particularly the non-oil sector accounted for the bulk of the foreign exchange inflows into the economy, but with subsequent neglect by successive administrations, Nigeria’s manufacturing sector, including the non-oil exports are struggling in the face of stiff competition in the international market.

The lack of capacity for value addition, the incessant products’ rejection by foreign trading partners and absent of quality standards among others remained key obstacles.

Until recently, when the apex bank has had to intervene in critical sectors of the economy, funding had remained a huge challenge towards industrialisation.

Why CBN is bordered

Notably, the central bank’s interest in supporting the real sector could be derived from the fact that the failure of the sector could negatively impact on monetary policy administration.

Today, the foreign exchange crisis faced in the country had been directly linked to the weak domestic output traceable to a largely subdued manufacturing sector as well as a struggling non-oil export sector.

Analysts have stressed the fact that the local currency could only be strengthened by boosting local output and exports. But the country’s current trade scorecard had shown otherwise, as imports had continued to outweigh exports for decades, further putting the economy in precarious condition.

Essentially, the country would have to export products to earn foreign exchange rather than continue fritter scarce reserves on importation.

This is the reason why the apex bank’s resolve to fund manufacturing as well as strengthen the non-oil export sector to get it back on their feet is not only music to the ears but should be applauded.

New FX bidding regime

The CBN governor had further hinted that a new Foreign Exchange bidding regime would soon be introduced by the apex bank, adding that the new framework, which is currently being fine-tuned, will be market driven and would support companies that accord utmost priority for local production and job creation drive.

The CBN governor said though details of the propose FX policy was still being worked on, foreign exchange support will be solely allotted for the importation of spares, plants and equipment needed to increase production capacities of local companies.

Expanding on proposed FX policy, he said, “It is being worked on and I can tell. But what we are saying in essence is that you would find a situation where those who will benefit from foreign exchange or who would be accorded priority – everybody will benefit – but those who would be accorded priority in FX allocation will be those who will embrace our interventions that will help to grow the economy; intervention that will create jobs for our people, not just people who just want to import and export everything- anything they do is import.”

He said, “We want to see to it that you are conducting business activities that reduce our imports and reduces your level of import, reduces your reliance on raw materials imports. But rather, there would be plants, equipment, spares priority and also ensure that by the time you are in business, the level of import you need will be very minimal if not entirely zero.

“Those will be the kinds of companies we will accord priority in FX allocation going forward,” he said.

100 for 100 PPP scheme

According to Emefiele, the cardinal objective of the 100 for 100 PPP initiative was to ensure that priority is accorded to companies who display verifiable progress in the bank’s imports substitution and job creation drive.
However, he said for this first cycle of the 100 for 100 policy, 243 applications valued at N321.06 billion, spread over key sectors including agriculture, energy, healthcare, manufacturing, and services sectors were submitted on the portal.

Emefiele said after much engagement, 79 applications valued at N121.87 billion, were received by the central bank from banks, for projects in six sectors, namely agriculture, energy, healthcare, manufacturing, mining, and services sectors.

According to him, the requests were carefully screened and scrutinised against a set-out selection criteria, categorised into production efficiency and scalability; local content capacity; job creation and human capital development; operating sector relevance; and potential contribution to economic growth.

The CBN governor said only 28 companies with projects that have clearly articulated proposals were selected for funding, adding that the CBN intended to revisit the applications that were declined with a viewing to understanding areas of their shortcomings in order to further enable more companies to benefit from the noble initiative meant to stimulate manufacturing output in the country.

He pointed out that over the past seven years, the government under the visionary leadership Buhari had made significant efforts at reducing our economy’s over-reliance on imports for food and industrial raw materials, towards one that is self-sufficient and self-reliant, with strong commitment towards ensuring that Nigerians produce what they eat and eat what they produce.

The CBN governor added that in line with the administration’s policy focus to stimulate domestic production and productivity, the central bank had continued to introduce various policy measures, in the form of interventions, to stimulate low-cost and sustainable financing to priority sectors and segments of the economy.

He said, “The 100 for 100 Policy for Production and Productivity (PPP) is one of such interventions designed to fast track productive activities in priority sectors.

Under this programme, eligible applicants will be required to submit their applications to their banks, after which, a notification is submitted on a dedicated portal – https://100for100ppp.ng, which has been created to ensure transparency and allow applicants track the status of their applications.”

Emefiele also said that the 100 for 100 policy was designed to stimulate investments in Nigeria’s priority sectors with the core objective of boosting production and productivity, which will aid efforts to stimulate greater growth of our economy and create employment opportunities.

He said, “Under this initiative, every hundred days, manufacturers in critical sectors that seek to engage in greenfield projects or in expanding their existing facilities will have access to cheaper forms of credit at single digit rates, as well as foreign exchange to procure plants and machineries.”

He said programme has the potential to significantly accelerate manufacturing output, promote further diversification of the economy and enable faster growth of our non-oil exports.

Essentially, he said the PPP would help to reduce the country’s over-reliance on imports, and stimulate productivity in agriculture, healthcare, manufacturing, extractive industries, logistics services, trade-related infrastructure, and renewable energy.

He said, “This launch also fulfills the commitment we made during the unveiling of the first central bank digital currency (CBDC), the eNaira, by His Excellency, President Muhammadu Buhari GCFR, on the 25th of October, 2021, when we announced that the CBN will introduce a 100 for 100 – Policy on Production and Productivity (PPP), under which eligible companies in priority sectors will be screened and 100 companies will be selected to receive funding from the CBN every 100 days, beginning from 1st November 2021.

“The selection of subsequent beneficiaries will be rolled over every 100 days with new sets of 100 companies and details of these companies will be published in the major national dailies.

“Today’s launch of the 100 for 100 Policy for Production and Productivity (PPP) initiative and cheque presentation to selected companies, is a culmination of our engagements with critical stakeholders in the manufacturing sector and financial institutions, as we have here today pioneer beneficiaries of the initiative and the participating financial institutions.”

Additional funding assurances

Emefiele, had further assured all current and prospective operators in the industrial sector that the CBN stands ready to continue to provide the needed support, financial and otherwise, to fast-track the development of the sector.

He said the central bank would continue to provide all the needed support, both in naira and dollar specifically for the importation of plants and equipment to actualise investments in new greenfield or existing brownfield projects.

Emefiele said, “With the significant opportunities in the real sector, there remains sufficient room for additional investments in the various sub-sectors and I would like to urge potential investors to take advantage of the various CBN intervention programmes and schemes, as well as other financing options out there, to invest in key sectors of our economy given the potential gains that could be generated from them.”

Non-oil export stimulation

The central bank also said it is working with stakeholders to stimulate non-oil export activities to boost foreign exchange earnings in the country.

This should come as huge relief to the exporters who had continued to groan under harsh business environment and had drawn government’s attention to challenges in the sector.

According to the apex bank boss, the initiative is aimed at generating the badly needed export earning amidst the uncertainty and oil price vulnerability. The idea is to make non-oil export more attractive to players by providing affordable financing at single digit as well as ensuring that operators who are into processed or refined products are accorded priority and supported by the central bank.

The intervention would further lay to rest, exporters’ complaints that it was difficult for them to access their export proceeds.

Emefiele, while expanding on the planned intervention said, “We are engaging and we will also be discussing extensively with the banks particularly on the Non-oil export stimulation facility in the coming days.

“Because we feel at this stage that while we are pursuing the programme on import substitution, we should also explore the best way to diversify our foreign exchange earning space and we think that Nigeria with all the opportunities and potentials, that there is need for us to look into export stimulation again in Nigeria.

“There are so many products in Nigeria and I mean finished products that end up in different markets in different part of the world but unfortunately, we find that those companies that produce those goods here in Nigeria do not earn FX from those items that get exported out of the country.”

He said, “Again, we suspect that they may have been illegally exported and that is why those countries are not getting the FX revenues. We will be engaging the banks at the next bankers committee to see to how we would make sure that all export transactions are properly recorded and that proceeds coming to help to boost even our export earnings and support local production.

“Our plan is also to see to it that those who truly conduct export activities, particularly where there has been value addition to the economy, not just export of raw produce but export of processed and refined goods, that we the CBN, takes up the responsibility to make sure we engaged the Ministry of Industry, Trade and Investment to ensure that what is due them through the earned Export Development Credit Grant that they normally receive, that they receive those.

“We are talking to banks to also see that whatever is offered by way of export credit to those companies that qualify, that bring in the export proceeds, qualify for the loans and those will go to those companies at more discretionary low interest rates so as to bring down the cost of their exports and encourage them to conduct their export activities where we will generate export earning that we badly need in our country today.”

Moreover, Emefiele had often reiterated the fact that the apex bank’s determination towards improving lending to the real sector of the economy was to stimulate employment generation and boost accretion to foreign reserves through non-oil exports.

To this effect, the bank had already supporting the Nigerian Export Import Bank (NEXIM) with a N50 billion-Export Refinancing and Restructuring Facility as well as N500 billion Non-Oil Export Stimulation Facility to further diversify the economy from oil.

Commendations

The CBN’s real sector intervention programmes have continued to receive accolades from the federal government, stakeholders and Nigerians in general.

The Secretary to the Government of the Federation, Mr. Boss Mustapha, while commending Emefiele, described the policy initiative as well thought out adding that it would significantly impact the economy if well implemented.

On his part, Minister for Labour and Employment, Dr. Chris Ngige, lauded the CBN for spurring economic activities through its various intervention programmes.

The minister noted that while productivity remained crucial for economic growth, the apex bank’s interventions had been key in achieving President Muhammadu Buhari’s aspiration to lift 100 million Nigerians out of poverty.

Ngige, at the ceremony said the country must take advantage of the country’s growing population to boost the economy, warning that the country may be sitting on a keg of gunpowder if nothing is done to address youth restiveness through employment generation.

Stressing that the Nigerian economy was still not properly diversified, he said without the various CBN interventions, the economy would collapse.

The President of the Manufacturers Association of Nigeria (MAN), Mr. Mansur Ahmed, commended the CBN intervention, adding that all members would provide support towards the programmes’ successes.

He praised Emefiele for showing commitment and determination towards addressing the challenges facing the economy.

Ahmed noted that while the oil economy had made little impact on the economy, the apex bank’s intervention efforts would achieve huge economic transformation adding that the way to reset the economy was to following the CBN governor’s mindset.

He also urged his members to take advantage of the CBN funding.

He added that MAN was ready to work with the central bank and commercial banks to make the policy a success.

The Chairman of the Body of Bank Chief Executives Officers, Mr. Herbert Wigwe, while commending the CBN efforts said the banks would do everything humanly possible to ensure the success of the policy.

He said the resolve was in further realisation that banks can’t survive without the customers. He also said Nigeria must take advantage of the youthful population, to commit them to productive ventures rather than allow them deploy their energies to negative activities which are detrimental to the economy.

Also, Managing Director, Harvest Feed and Agro-Processing Limited, Mr. Adedolapo Adeyemi, who is one of the beneficiaries of the intervention 100 for 100 policy initiative said, said the support would boost its production by 60 per cent as well as create about 300 jobs.

While commending the CBN on behalf of other beneficiaries, he said the scheme would be a major breakthrough for businesses in the country.

Emefiele, however, appealed to the banks to give special consideration to small businesses in view of their capacity to create jobs for the teeming population.