To save naira, CBN unveils fresh support for private sector

The Central Bank of Nigeria (CBN) has rolled out a new financial instrument called “The 100 for 100 PPP” that targets more funding for private sector to boost productivity, encourage exports, cut down current massive imports and ultimately support the weak naira.

Godwin Emefiele, the CBN governor, announced this on Monday at the launch of the much-awaited CBN digital currency – the eNaira – at the Aso Villa in Abuja, but did not mention the total amount being targeted with the new financial instrument that will go public November 1.

“Today, in addition to all policies and actions of the CBN to support the economy, especially through the trying times of COVID-19, the apex bank is announcing a new financial instrument titled “The 100 for 100 PPP – Policy on Production and Productivity,” which will be anchored in our Development Finance Department under my direct supervision,” Emefiele said in his address.

Under this policy, Emefiele said the CBN would advertise, screen, scrutinise and financially support 100 targeted private sector companies in 100 days, beginning from November 1, 2021, and rolling over every 100 days with new set of 100 companies whose names would be published in national dailies for Nigerians to verify.

According to Emefiele, the financial instrument will work through banks, and will be available to their customers to boost production and productivity and to immediately transform and jumpstart the productive base of the economy.

After these initial 100 projects by companies in the first hundred days from November 1, the CBN will then take the next 100 companies/projects for another 100 days beginning February 1, 2022 and then another 100 companies for another 100 days beginning from May 1, 2022, he said.

Read also: eNaira to boost GDP by $29b in 10 years – Buhari

“The purpose of this instrument is to take further steps to reverse our over reliance on imports,” he stated.

Africa’s largest economy depends largely on imports and obviously, rising dollar demand has put pressure on the naira as foreign exchange earnings thin and reserves struggle. The reserves have managed to exceed $40 billion in several months, helped by proceeds of a recent Eurobond issuance.

“We believe that if we target and support the right companies and projects, we will see a significant, measurable and verifiable increase in local production and productivity, reduction in certain imports, increase in non-oil exports, and improvements in the FX-generating capacity of the economy,” the CBN governor said.

He acknowledged that there have been continuing debate on the true value of the naira, but, rather than worry today on the direction of the exchange rate, it would be critical to look at how the country got into the mess of becoming a largely import-dependent nation.

He recalled that since the advent of the International Monetary Fund (IMF) led Structural Adjustment Programme (SAP) in 1986, and the introduction of the Second Tier Foreign Exchange (SFEM) market, the naira had been on a one-way free fall from parity to the US dollar in 1984 to over N410/USD today.

But some 35 years later, Nigeria has not been able to achieve the many promises and objectives of that programme.

“Instead, what we have seen is widespread import dependency, which have wiped out most of our production and manufacturing bases and exported all our jobs in the process.

“What has happened to the massive textile factories across our nation such that we import almost all cotton products when we are rich in cotton? What has happened to our vehicle assembly plants across the nation such that we import most vehicles and have become a massive dumping ground for dying second-hand vehicles?

“What has happened to our rubber plantations through which we made the best tyres and rubber products in the world? What has happened to our groundnut pyramids? What has happened to our cocoa farms? What has happened to our palm oil mills?” he queried.

“We must stop this decline for good! We must return to massive homemade production; we must get our people working again. We must create the economic environment for massive domestic production and significant non-oil exports,” he said.

The CBN believes that this new strategy “is the best and most sustainable way to address the naira’s value – whether in hard currency or digital eNaira – through production, production and more production,” he said.

While assuring that the FX reserves were strong and getting stronger “crossing the $40 billion mark, and is one of the highest in Africa – and growing,” the governor warned against frittering away the nation’s reserve on cheap imports and currency speculators.

“We must return to an employment-led growth anchored on productivity and rewarding producers of local goods, services, innovation and new technologies.

“If you consume cheap imports and export our jobs, we will make you pay dearly; but if you produce locally – with little or no foreign inputs beyond machinery, we will support you, and the markets will reward you abundantly,” he assured the private sector operators.

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