May 22, 2023

CBN and economy: Recognising Emefiele’s highpoints

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AS a policy analyst with keen interest in the policies and operations of the Central Bank of Nigeria, CBN, one can say without equivocation that the CBN Governor, Mr Godwin Emefiele, is a patriot and consummate professional banker under whose leadership CBN has evolved policies that bear relevance to the health and prosperity of the economy.

On his assumption of duty in 2014, Emefiele immersed himself in the job with patriotic zeal and a good understanding of the vision and mission of CBN. It was evident from his maiden speech that he has a good understanding of modern concepts of central banking, global best practices and the challenges, complexities and peculiarities of the Nigerian economy.

Emefiele understands that there has been a global change in the theory and practice of central banking, and that central banks in developing countries play a wider role and serve as financial catalysts by performing both the traditional and non-traditional roles. They do so because of the absence of vibrant capital markets in developing countries, thus the need for central banks to fill the gap in other to increase the monetary transmission mechanism. 

Central banks in developing countries adopt the policy of controlled expansion of bank credits to undertake direct financing of development projects by lending liberally to those institutions that provide development finance.They frame their monetary policies in such a way that larger and desired bank credits go to the priority sectors such as agriculture, manufacturing, cooperatives and export trade.

Accordingly, Emefiele, from the onset, outlined strategic and appropriate policy options towards safeguarding the health of the financial system and economy, boosting the priority sectors and correcting the structural imbalance of the economy, going forward.

 He has remained focused and determined in the midst of challenges and criticisms, most of which were unwarranted and came from arm-chair critics and vested interests, based on their biases, emotional and subjective judgements, misperceptions, shenanigans and machinations, and a lack of proper understanding of the dynamics of monetary policies and the complexities of the economy.

His critics fail to appreciate the aberrant nature of the economy which has made it to be obstinate and resistant to guidance and discipline. They also fail to understand that the Nigerian economy is highly sabotaged virtually on all fronts, as a result of which some good intentioned policies can be frustrated. Some of the economic saboteurs include the political class with vested interests and a penchant for corruption and conspicuous consumption, some banks which covertly breach rules for selfish gains.

Others include some privileged and powerful government officials and business men who circumvent due processes, as well as smugglers, opportunistic thieves, unpatriotic and individualistic minded law enforcement agents who seek self-gain and such others who manipulate the system and circumvent rules and policies.

In the face of severe challenges, Emefiele has remained focused and demonstrated determination to safeguard the health of the financial system and economy. The importance of the financial system in driving the economy cannot be overemphasized. Emefiele has stoically ensured financial system stability which is germane. He has been able to do that by anchoring on two pillars: managing factors that create liquidity shocks and having zero tolerance on practices that undermine the health of the financial system. Thus, the financial system has been very stable under his leadership as CBN Governor. In recognition, Forbes New York noted that ‘’the CBN Governor has been able to regulate Nigerian banks and evolved policy measures to stabilise the economy in the face of global imbalances’’.

CBN under Emefiele held forte in the economy during the six months period before President Buhari appointed and assigned portfolios to his ministers. And beyond that, the CBN boss evolved innovative policies which helped to pull the economy out of recession in 2016. He also initiated proactive policy measures which helped to shield the economy from the devastating effects of the COVID-19 pandemic. But for the policies which supported virtually all the sectors of the economy, the pandemic would have ravaged the economy.

Emefiele also triggered a growing interest and return to agriculture through various innovative policies under development financing, in accordance with the neo-liberal role of central banks in developing countries.

Figures show that there are about 4.8 million small holder farmers who accessed loans through the various initiatives and the results are manifest, especially in rice production and other products such as cassava, tomato, potato, oil palm, maize, yam, etc. The growing interest in agriculture has reportedly created a huge impact in the economy. Emefiele noted that ‘’our mid-term goal is to fast-track growth above historic average’’. 

Furthermore, he boosted support to the manufacturing sector which is the very essence of the secondary sector of the economy. Manufacturing has the highest employment multiplier effect, feeds aggregate demand, leads to urbanisation and enhances the living standard of the people.

Under him, CBN established several intervention funds, including the Real Sector Support Facility, RSSF, to boost manufacturing. RSSF makes it possible for manufacturing and agriculture concerns to get funds at a single-digit interest rate of nine per cent for up to 10 years and with a moratorium of two years.

In addition, CBN mandated banks to increase their loan to deposit ratio or risk a fine. That triggered a greater flow of credit to the manufacturing sector. And in 2020, CBN set up a N1 trillion facility aimed at supporting growth and expansion of manufacturing firms. 

The World Bank commended CBN’s policy initiatives and noted as follows: ‘’Thus far the CBN policy initiatives and development finance interventions have helped prevent a severe credit crunch in the private sector.’’

There are other notable policies of CBN under Emefiele which bear positive relevance in the economy. The recent naira redesign policy is a good intentioned policy that will be very beneficial to the economy. But unfortunately, it suffered a mishap due to sabotage by some banks, and the shenanigans of some political juggernauts and vested interests who had misperceptions and misunderstandings of the policy objectives. The unintended consequences and pain inflicted on the populace due to the policy dislocation is regrettable and should not be used as a yard stick to judge the good works of Emefiele. The naira redesign policy is good for the economy and it is believed that the benefits will manifest going forward.

CBN under Emefiele has also been battling inflation using stabilisation measures, contractionary and restrictive monetary policy in accordance with global best practice. The policies may not have completely rein in inflation, due to the complexities and peculiarities of the economy, but they are gradually de-escalating it.

It is important to understand that economies go through cycles and tough times. America had faced the biggest recession several years ago and the economy was at the brink of collapse. It went through another tough cycle in 2008-2009 when Be Bernanke, alias ‘’Helicopter Ben’’, was the Fed Chairman. Bernanke used Helicopter Money Drop as a monetary stimulus strategy to reverse the collapse in aggregate demand during the great depression of 2008-2009, thus the nick name, ‘’Helicopter Ben.’’ 

Japan had also faced stagnant growth for several years, and other economies too.

 Economies ride through crest and troughs and Nigeria is not an exception. As noted earlier, Emefiele and his team helped to pull the economy out of recession in 2016. That was honourable and highly commendable. May be his nickname should be: ‘’The man who quashed recession.’’

 Forbes New York recognised and honoured Emefiele with the Forbes Best of Africa Lifetime Achievement Award in recognition of ‘’his remarkable performance and pace-setting achievements’’.

Nwobu, a policy analyst and chartered stockbroker, wrote from Abuja