Two Years On: Emefiele’s CBN Gropes For Monetary Stability


Amidst evident shocks in Nigeria’s economy, the Central Bank of Nigeria (CBN), has struggled to evolve sound monetary policies since the last quarter of 2014. With government revenue and external reserves profile dipping, the apex bank’s policy efforts to cushion the adverse effects of economic glitch remain on the high. COBHAM NSA and CHINYERE OBIORA scrutinize ‘Governor’ Godwin Emefiele’s score card in the last two years

Though his emergence as the new Central Bank of Nigeria (CBN) governor on June 3, 2014 followed the contentious exit of Mallam Sanusi Lamido Sanusi, it still got the industry watchers talking. The controversies generated by allegations of the missing 20 billion dollars from crude oil deals by the Nigerian National Petroleum Corporation (NNPC), failed to overshadow the applause for Mr Godwin Emefiele with many describing him as one of Nigeria’s brightest operators in the banking sector. He took over the reins when pressure on the Naira and thinning foreign reserves were already visible on Nigeria’s economic horizon due to global oil price drop. But typical of new appointees to public offices, he uploaded usual flowery talks about his vision for the sector.

The Visionary’s Trolley

On his broad list of inventive mission were: pursuing gradual reduction in key interest rates and unemployment rate in monetary policy decisions; Maintaining exchange rate stability and aggressively shoring up foreign exchange reserves; Building sector-specific expertise in banking supervision to reflect loan concentration of the banking industry; Abolishing fees associated with limits on deposits and reconsidering ongoing practice where all fees associated with limits on withdrawals accrue to banks alone; Considering and announcing measures to effectively address existing anomaly occasioned by inadequate triggering of thresholds from a macro-prudential perspective. Not yet done, Emefiele also envisioned el-dorado in areas such as: Introducing a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, and oil and gas; Establishing Secured Transaction an National Collateral Registry as well as establishing a National Credit Scoring System that will improve access to information on borrowers and assist lenders to make good credit decisions; Building resilient financial infrastructure that serves the needs of the lower end of the market; and Renewing advocacy for the creation of commercial courts for quick adjudications on loan and related offenses.

Mandate Execution

Experts acknowledge CBN has battled hard to combine its traditional functions with the task of helping fiscal authorities to stimulate increased productivity within the economic space in the last 24 months. However, by the last quarter of 2014 when the economy recorded a burst cycle in the oil industry, these responsibilities had become quite demanding. This got Emefiele to raise alarm in September 2015 that if urgent measures were not taken, economic recession looms due to failed growth recorded in two successive quarters. His fears then was that, “Having seen two consecutive quarters of sluggish growth, the MPC recognized the economy could slip into recession in 2016 if proactive steps were not taken to revive growth in key sectors of the economy.” And today, that reality is here with Minister of Finance, Kemi Adeosun admitting that Nigeria’s economy is ‘technically’ in recession.’

Financial Policy Implementation

Flowing from National Bureau of Statistics (NBS) data on the economy, CBN in July 2015 adopted accommodative monetary policy to address growth concerns and effectively free more funds for Deposit Money Banks (DMBs). Executed through lowering both Cash Reserve Ratio (CRR) and Monetary Policy Rate (MPR), the CBN warehoused excess liquidity amassed thereof for productive investments in real sector of the economy. Sadly, analysts flay the policy’s lack of impact on the market because CBN took long to process verifiable investment proposals submitted by DMBs that sought to access funds for real sector investments. Despite CBN’s injection of liquidity into the system, the DMBs failed to grant credit as envisaged due to rising profile of Non-Performing Loans (NPLs), particularly in the oil sector. Available statistics indicate credit to the private sector went up by 1.45 per cent in February 2016, with annualized growth rate of 8.70 per cent that is below the benchmark growth of 13.28 per cent. Aside concerns over dismal performance of credit growth to private sector, even available facility went to low employment elasticity sectors of the economy. The oil market volatility threat to Nigeria’s foreign exchange earnings has put the apex bank under pressure for policy instrument to discourage importation, especially of goods that could be produced locally.

Banking Sector Regulation/Supervision

DMBs are really feeling the heat of macro-economic turbulence in the country. Beside huge financial dips posted in their 2015 full year results, some banks have shown visible signs of rough days ahead with systematic cutback in staff strength. However, these worrying signs come on the heels of CBN’s assurances that different scrutiny on the financial institutions confirmed their healthy status. Like many financial experts, recently retired Group Managing Director and Chief Executive Officer, United Bank for Africa (UBA) Group, Mr. Phillips Oduoza observes the Nigeria’s banking industry as buoyant given enhanced regulatory supervision. He disagrees that there are too many guidelines in the industry, saying: “I do not think that Nigerian banks are over-regulated. I think you need to look at other jurisdictions and look at the level of regulations we have. One of the most regulated environments is the United States. If anything at all, I think they are moderately regulated. So, I think the banking industry remains strong and governance is very strong compared with where we are coming from, risk management is very robust and the industry is very strong.” Also, efforts at achieving financial system soundness and safety have seen the apex regulator conducting several Risk-Based examinations on banks with High and Above Average Composite Risk Rating as well as those with Moderate and Low Composite Risk Rating since June 2014. Others measures include the Foreign Exchange Examination of banks; routine assessment of all discount houses and financial holding companies as well as Risk Asset Examination of 24 commercial banks. Also, the CBN commenced the BASEL II Accord implementation to promote financial system stability and ensure banks are adequately capitalized with institutionalized and enhanced risk management systems. Similarly, new guidelines have been issued to efficiently regulate Bureaux de Change (BDCs) operations and prevent: rent-seeking among operators; depletion of the nation’s foreign reserves; unauthorized financial transactions; dollarising the economy; the unwieldy number of BDCs; and the unpleasant rating of Nigeria as the world’s largest importer of dollars.

Payment Management System

With about N3 trillion mopped up from the system, the Treasury Single Account (TSA) has fairly curbed multiplicity of bank accounts and careless spending by Ministries, Departments and Agencies (MDAs). Other innovations are the spread of Cash-less Project across the country on July 1, 2015 to support use of e-channels of payment; reduce cost to service; increase tax collection; block leakages; enhance greater financial inclusion; engender economic growth; introduction of Agent Banking to increase financial inclusion; adoption of Electronic Payments Incentive Scheme (EPIS) for e-payment by incentivizing merchants, cardholders and sales persons; and removal of Commissions on Turnover (CoT) by banks. Not forgetting the gains of Bank Verification Number (BVN) in strengthening the industry and amplifying the cashless policy. Besides protecting banks and reducing fraudulent practices, the BVN is a strategy to ensure Nigeria ranks among the top 20 largest global economies by 2020. This is part of the financial inclusion policy of the Financial Sector Strategy (FSS) programme.

Consumer Protection/ATM Charges

Dilemma Through its Consumer Compliance Examinations and spot-check on DMBs, over N4.01 billion has been refunded to banks’ customers based on complaints lodged with the unit. Also, full deployment of the Consumer Complaint Management System (CCMS) has been concluded with all banks migrating to the system’s live platform. However, concerns have not subsided over the N65 withdrawal charge on transactions by card holders on other banks’ ATMs. Many customers say the policy is only on paper as charges are always recorded in the first attempt. They described the development as daylight robbery by DMBs, which is being condoned by the CBN.

Rising Poverty Level

As encapsulated in his inaugural speech, Mr Emefiele’s strategic vision still remains: Repositioning CBN’s developmental financing initiatives through broad-based spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, oil and gas; Establishment of a Secured Transaction and National Collateral Registry as well as the establishment of a National Credit Scoring System that will improve access to the information on borrowers and assist banks make good credit decision; and Build resilient financial infrastructure that serves the needs of the lower end of the market, especially those without collateral. But with this laudable vision yet to crystallize, Nigeria’s current poverty rate has hit the 71 per cent mark from about 60 per cent. With no signs of easing soon, inflation rate is about 15 per cent from seven per cent now.

Outrage Over ‘Targeted’ Recruitment

Aside its entanglement in the infamous ‘Dasukigate’, claims of over 147 staff recruited under Emefiele’s watch without due process is a perceived dent on the CBN. The excuse that it relied on covert employment processes in the last two years as part of its “Targeted Recruitment” did not stop the public outcry against this disturbing development. One social commentator captured it thus: “What this means is that 147 people gained employment into a federal government establishment, which Emefiele heads, through the back door at a time when there is an urgent need for the country to retrace its steps and adopt due process as a national lifestyle.”

Development Finance

On assumption of office, Emefiele did express his resolve to reposition CBN’s developmental financing initiatives. But experts have queried its verifiable capacity to act as a financial catalyst in specific sectors of the economy, particularly in relation to agriculture and solid minerals development. For critics, the issue is: “Has CBN’s activities in the last two years stabilized the monetary policy; encouraged and stimulated bold efforts at job creation on a massive scale; enhanced local food production; promote dogged conservation of meager foreign reserves; and engender clear cut productive activities in the mining sector?” Other posers requiring answers from Emefiele and the CBN’s egg heads include: “What has happened to the various interventions funds initiated by the bank in the past?; What is the likely positive impact of the recently launched Youth Innovative Entrepreneurship Development Programme (YIEDP) to heighten CBN’s intervention in real sector and job creation efforts of government? Having enunciated the pilot phase as targeting 10,000 youths in productive activities within the next four years with a credit line of about N3 million accessible by each suitable participant, critics who readily cite past failed schemes and are also asking, ‘What next?’; and ‘What guarantee is there for success in the current dispensation.’ Happily, Emefiele’s CBN is not lacking assurances that ‘it would not be business as usual’ with its pledge that recipients who utilize the funds properly would be encouraged to migrate to other intervention schemes for the purpose of accessing further funds.

Forex Management

With barrage of criticisms, Emefiele’s forex management policy had remained a blot that financial market commentators refused to let off the steam. For them, the initial huge gap between the official and black market rates largely accounted for the disappointing flow of foreign direct investments and foreign portfolio investors into the country. So, the current flexible exchange rate is key with likely lasting impact in shaping Emefiele’s tenure as CBN boss. Among issues financial minds believe this policy is addressing are improved efficiency of foreign exchange allocation in the economy; reduced distortions in the forex market; enhanced liquidity in the foreign exchange market; and pushing the economy closer to equilibrium. Defending the policy’s potential to attract more local and foreign investments into the country, a pro-Buhari Media Support Group (BSMG) says it also has the capacity to clean the Aegean stable where FOREX trading in the country was loosely regulated, with the CBN looking away ‘when officials of government and their cronies became overnight foreign exchange traders.’

Inventory Of The Intervention Funds

Though government programmes manifested after about nine months lull in the economy, pundits still see a culpable CBN in the apparent slow pace of activities on the financial sector. To them, “Yes, the Anchor Borrowers’ Programme (ABP) has been launched by President Buhari to build economic linkages between over 600,000 smallholder farmers and respected large-scale processors for increased agricultural output and improved capacity utilisation of integrated mills; Yes, there is about N40 billion from the N220 billion micro, small and medium enterprises development fund for farmers at a single-digit interest rate of nine per cent; Yes, CBN has a N300 billion Real Sector Support Fund (RSSF) as part of efforts to unlock real sector potential and engender output growth, ensure value added productivity and job creation; Yes, there is N152 billion for five projects under the RSSF; Yes, disbursement of the N213 billion Nigerian Electricity Market Stabilisation (NEMS) facility is on; Yes, we have N300 billion Power and Aviation Intervention Fund (PAIF); Yes, so much is said about the N500 Billion Real Sector Intervention Fund; Yes, N185.172 billion Intervention Fund for manufacturing sector is domiciled in Bank of Industry; Yes, N200 billion Intervention Fund for Re-Financing and Restructuring of Banks is available; Yes, the N220 billion Micro Small and Medium Enterprises (MSMEs) Intervention Fund will help micro-finance banks to stabilize, do businesses well and serve the public better; Yes, the Commercial Agricultural Credit Schemes (CACs) amounts to N200 billion; Yes, a total of N750 billion is packaged as Agric Intervention Fund; and Yes, an Intervention Fund is underway for local miners among numerous others already in place or still in the pipeline.” But in all these, what do we have to show in terms of sustainable development and growth in the country today?

Complicity In Dasukigate?

This is one sore area scores of financial minds seem indifferent despite steady but damning revelations in the public space. Claims of conspiracy of silence among stakeholders, industry watchers and even the government rent the air. Surprisingly, commentaries are in short supply on the way and manner the man entrusted with the nation’s vault ‘supposedly stood aloof and watched helplessly’ as our treasured commonwealth was not only being ferried from the CBN into private pockets but frittered away on scammed contracts, personal projects, political gerrymandering and other frivolities. No doubts, never in the history of central banking in Nigeria has the tenure of a CBN governor been this tainted by allegations of ‘malfeasance; weak internal controls; employment scandal; money laundering; and top management compromise.’ But like many Nigerian public officers before him, his stay and performance as CBN governor would be left for either harsh or favourable judgment of history. And so be it.

Road To A New Beginning

Hopefully, these laudable programmes, policy projections and interventions’ financing are not on paper alone because the CBN has recorded noticeable milestones in sustainable monetary policy implementation over the years. However, it must promote the change agenda by being more open, transparent and accountable to Nigerians in its core mandate and social responsibility delivery. Arising from mouth watering amounts floated as intervention funds, it is needful for the public to now know: ‘What has happened to such funds in terms of disbursement and utilization levels?’ Also, it is not out of place to demand a comprehensive inventory profiling all such funds; The beneficiaries; Locations of all portfolio investments of the funds and their conditions; Visible impact of these investments on the economy; Their current repayment and recovery status; List of individuals, groups or companies that may have defaulted in terms of existing agreements; and Steps taken by CBN to ensure effective service delivery by beneficiaries of these funds among others very troubling issues surround and trail all the intervention packages.

Jettisoning The Old Order

Though a tall order; but experts argue that CBN cannot maintain its old and opaque ways, yet expect different results. They urged the bank to shun the practice of rolling out intervention funds without undertaking comprehensive auditing of past schemes and programmes. Looking at all variables, there may not be arguments over Emefiele’s assertion that, “The far reaching objectives of the CBN in the implementation of schemes and programmes for real sector development focus on the inherent potential in the sector is-a-vis our conviction that the sector has sufficient employment capabilities, high growth potentials, contributes significantly in accretion to foreign reserves, expands the industrial base and apparently diversifies the growth potentials of the national economy.” However, greater openness, transparency and accountability in the administration, monitoring, evaluation and lessons learnt from past schemes, their implementation and general delivery processes would do Nigeria a lot of good. The time has come for stakeholders to rethink and deliberately assist the government and CBN in tackling and permanently disabling factors that are contributing or may have contributed to the country’s failed or sluggish drive towards sustainable socio-economic growth and development in the last three decades. That time starts now!

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