How CBN is supporting economic diversification
…Out of box solution to drive financial inclusion, FX remittances
The persistent Foreign Exchange (FX) crisis occasioned by dollar shortage in the banking system to meet legitimate needs has remained worrisome.
This has been attributed partly to the consumption patterns of Nigerians who prefer foreign goods to locally made ones, resulting in increased demand for dollars for imports.
Meanwhile, Africa’s largest economy is a mono-product economy, depending solely on revenue from crude oil.
The Central Bank of Nigeria (CBN), under the leadership Godwin Emefiele, its governor has taken major leaps to diversify the economy away from largely oil-based economy through its numerous interventions.
“We have supported non-oil sectors such as agriculture, manufacturing, health care, education, power and aviation and other allied economic value chains. You may recall that our flagship Anchor Borrowers’ Programme (ABP) that heralded recent rice revolution in Nigeria has changed the long-standing dependence on imported rice as the country is not only depending on domestic production, but we have now become a rice exporting country. The Commercial Agriculture Credit Scheme (CACS) is a major special purpose vehicle to support commercial farmers in the country in different value chains including oil palm, cotton, cocoa, among others,” Emefiele said.
He noted that a CBN’s continued support to the manufacturing sector and MSMEs have been yielding great results as the implementation of 44 items not valid for FX for imports has revealed.
“Let me take this medium to inform you once again that our intervention in the health sector, for example has begun to reduce the health care tourism being sought outside the country which is helping to conserve our foreign exchange and improve our well-being, he said.
Emefiele said the new 100 for 100 Policy on Production and Productivity (PPP), which is targeted at harnessing the local raw materials to increase domestic production, as well as exports through deliberate credit and other supports, will soon begin to yield quality results. Moreso, the RT200 FX initiative designed to take advantage of the large domestic production to other regional markets is targeted to increase foreign exchange inflows to the economy and support exchange rate stability. In addition, he said the on-going work at the Dangote Refinery, when fully completed, will stop fuel importation just as witnessed in cement, sugar and fertilizer market.
According to him, out of the box solutions would drive financial
inclusion, Small and Medium Enterprise (SME) growth and the creation of start-ups.
He said the solution would also facilitate cross border trades and transfers as well as international remittances and Foreign Exchange (FX).
Speaking at a one day seminar for Finance Correspondents and business editors in Lagos, he said out of the box solutions would ensure effective implementation of welfare-inclined government programmes; and enhance efficiency in the interbank market.
He said the theme of the seminar, which is “Policy Options for Economic Diversification: Thinking Outside the Crude Oil-Box” was not only appropriate but quite timely in the Bank’s quest and resolve to change the narratives of depending on a mono-product oil-led economy, towards building a broad-based and well diversified economy that guarantees overall macroeconomic stability.
He noted that since 2019, the world has been facing severe shocks, propelled by the Covid 19 pandemic and the Russian-Ukraine war that have continued to threaten global growth and overall macroeconomic stability.
The quest for building a more sophisticated economy anchored on agriculture, Micro Small and Medium Enterprises (MSMEs), industrial and manufacturing concerns have become the major component of the CBN’s monetary policy, he said.
Nigeria has largely depended on the oil sector for revenue generation over the past four decades and the sustained decline in crude oil production has continued to negatively undermine the performance of the economy. Thus, he said there is the urgent need for a conscientious effort to diversify to other non-oil sectors.
“As I have often said, it is important that we work to create an economy that will enable us feed ourselves, create jobs for our teeming youths and improve the standard of living of our people. With our population growing by over 3 percent per annum over the past seven years, against a less than steady growth in output since 2019, expanding the production and industrial capacity of the economy must be given special attention to ensure overall macroeconomic stability,” Emefiele said.