3 years of impressive, splendid performance of CBN governor, Godwin Emefiele

3 years of impressive, splendid performance of CBN governor, Godwin Emefiele

By Mariam Sanni, Abuja

On June 3, 2014, Dr. Godwin Emefiele assumed office as the Governor of the Central Bank of Nigeria, when there was visible pressure on the Naira as well as a decline in the country’s foreign reserves, and this year marks 3 years which he has been saddled with the responsibility of heading the Nigerian banking sector and a large swathe of its economic fortunes.

The amiable but largely effective senior public servant who came on board a while after the tenure of the combative former CBN governor, Sanusi Lamido (now an emir) has been able to weather the storms associated with his lofty office.

The recent downturn in crude oil prices at the global market coupled with declining revenue into government coffers and a fall in the value in Naira which would have crushed any other technocrat has rather emboldened the current CBN boss to fashion out tough measures to keep the critical sector alive.

The challenges are many but many in the financial sector opine that the leadership of the CBN has been able to live up largely to expectations.

It would be recalled that the Governor took over the seat from his predecessor when there was pressure on the naira as well as a noticeable decline in the country’s foreign reserve. He has been able to substantially tackle the heat and the unsavoury trend has exerted on the nation’s fortunes though more needs to be done.

The Apex bank boss has been very inventive. The optimism is anchored on the fact that he has so far catered for all segments of the society through his very unusual, practical, and effective initiatives that are now cooling the economy which had become incandescent owing to the voracious appetite of Nigerians for foreign made goods and services.

Vision

The Governor on the assumption of the office on 3rd of June 2014 unveiled his ambitious vision for the Nigerian financial sector. These include: Pursuing gradual reduction in key interest rates, and including unemployment rate in monetary policy decisions; maintaining exchange rate stability and aggressively shoring up foreign exchange reserves; and building sector-specific expertise in banking supervision to reflect loan concentration of the banking industry, among many others.

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Achievements

Another unique approach to managing FX in Nigeria introduced by the CBN under Emefiele’s watch, is the third window (between official and black parallel market rates) from where school fees and overseas medical bills are funded. The policy has eased the discomfort hitherto suffered by parents over payments of their kids’ school fees and the infirm who were seeking medical attention abroad.

The CBN innovative relief, cars spare parts such as tyres, batteries, and health care essentials like medicines plus other commodities like inputs in the manufacture of goods critical to human existence had become very scarce in Nigeria.

The lack of access to FX was so severe that living in Nigeria was becoming comparable to being in a Hobbesian state comparable to life in Zimbabwe when it was under global sanction after expelling white farmers and Venezuela currently suffering from resource curse. But today, thanks to Emefiele, the story of Nigerian economy is changing fast.

Under the leadership of Emefiele, hitherto banks accepted only fixed assets like houses and bare land as collateral and the CBN under Emefiele has been working hard to push the policy through legislation which it finally succeeded in doing recently.

 

Financial System Stability

Emefiele and his team at the CBN have ensured stability in the sector, despite global and domestic challenges. There is no doubt that the bank under his watch is on the right track to guaranteeing the soundness and stability of the Nigerian financial system.

His vision of gradual reduction in key interest rates, building sector-specific expertise in banking supervision to reflect loan concentration of the banking industry, abolishing fees associated with limits on deposits and reconsider ongoing practice in which all fees associated with limits on withdrawals accrue to banks alone; introducing a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health, and oil and gas, are rightly bring the desired results.

Given that the exchange rate had hit N500/$1 a few months back and critics of Emefiele’s policies had forecasted that it might ramped up to the N1000/$1 level, if he did not capitulate to their policy concepts of floating the Naira freely, it has put butterflies in the stomach of most entrepreneurs that the Naira is regaining its lost value.

Much as it is not yet Eldorado at the prevailing rate of N360/$1, the rates are slowly but surely coming down, and that’s assuming the massive infusion of dollars can be sustained, plus the rates have also become less volatile.

The justification for the prohibition was that most of the 41 items could be produced locally, hence they were cut off from receiving FX from the CBN with a view to encouraging importers to engage in a sort of backward integration through farming.

Despite the proactivity of the CBN in safeguarding the international value of the Naira, the activities of speculators and some noticeable failures in the market mechanism led to further depreciation of the Naira.

Of concern to the Bank, and indeed the economy, was the fact that the currency speculators held sway across various social strata and held on to huge dollar deposits, in anticipation that the Naira would further decline in the face of scarcity of the ‘greenback’.

Not minding the current challenges, the CBN had promised to act in good faith with the best available information and in cognizance of current economic conditions pursue the goals of price and financial system stability, as well as catalyze job creation and inclusive growth.

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Agricultural Credit Scheme
As part of its developmental role, under the leadership of Emefiele, the Central Bank of Nigeria (CBN) in collaboration with the Federal Ministry of Agriculture and Rural Development (FMA&RD) has established the Commercial Agriculture Credit Scheme, hereinafter referred to as CACS, for promoting commercial agricultural enterprises in Nigeria, which is a sub–component of the Federal Government of Nigeria Commercial Agriculture Development Programme (CADP).

This fund will complement other special initiatives of the Central Bank of Nigeria in providing concessionary funding for agriculture, such as, the Agricultural Credit Guarantee Scheme (ACGS) which is mostly for small scale farmers, and  Interest Draw-back scheme.

The scheme is aimed towards fast tracking development of the agricultural sector of the Nigerian economy by providing credit facilities to commercial agricultural enterprises at a single digit interest rate, Enhancing national food security by increasing food supply and effecting lower agricultural produce and product prices, thereby promoting low food inflation, Reduce the cost of credit in agricultural production to enable farmers exploit the potentials of the sector, and to increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

It could be recalled that CBN boss assured farmers that the CBN would continue its intervention schemes towards making agriculture the bedrock of genuine economic growth in Nigeria.

Mr. Emefiele made the pledge on Friday April 22, 2016, when he undertook an assessment tour of a rice producing community in Kebbi State under the CBN-initiated Anchor Borrowers’ Programme.

 

Banking and payment system

To strengthen the payment systems, Emefiele- led CBN in conjunction with the office of the Accountant General of the Federation (OAGF), e-collection element of the Treasury Single Account (TSA) took off on March 1, 2015.

This ensures real time remittance of government receipts directly into the Consolidated Revenue Fund Account (CRF) to enthrone transparency and accountability in management of government receivables, and promotes effective monetary policy and reduces cost of liquidity management borne by the bank. Removal of charges on cash deposits was also introduced to encourage flow of deposits to DMBs.

On July 28,2016, directed commercial banks to allow savings account customers with BVN to lodge cheques of not more than N2m per customer per day, into their accounts.

As head of the CBN, he uses (as raw materials), his vision, to shape the banking sector into a product that is helping to reposition the Nigerian economy. Emefiele because of high standard of expertise, professionalism and informed banking analysis that every bank in Nigeria can adopt and make good use of.

Emphatic that there is nothing wrong with Nigeria’s economy that cannot be corrected by what is right with it, Emefiele and his team also directed the removal of fixed interest rate on credit cards, discontinuation of actual address verification in account opening for customers with BVN.

Adding that banks should begin to embed BVN biometric data in payment cards issued henceforth, to facilitate offline BVN verification and biometric based customer authentication on such payment devices at ATMs, point of sales terminals, POS, Kiosks.

The Bank, in addition to its monetary policy goal within the last three years, has continued the implementation of its development finance initiatives as well as its payments system viz: the cashless policy, Bank Verification Number (BVN) and Internet Banking, all of which are targeted at ensuring Financial Inclusion.

Consumer Protection 

The bank has within the period facilitated the refund of more than N4.01 billion to bank customers based on complaints resolved and directives communicated to them following the Consumer Compliance Examinations and a spot-check conducted on the banks. It concluded full deployment of the Consumer Complaint Management System (CCMS) with the migration of all banks to the live platform of the system.

Following the clearing of a backlog of matured letters of credit at the inception of the current flexible exchange rate system, the CBN promised and indeed began to provide foreign exchange to all commercial banks to meet the needs of both personal travel allowances (PTA) and business travel allowances (BTA) for onward sale to customers.

In February 2017, the CBN emerged with a new policy aimed at increasing the availability of Foreign Exchange in the market and to ease the difficulties encountered by Nigerians, particularly retail end-users, in obtaining funds for foreign exchange transactions for Personal and Business Travel, Medical needs, and School fees, all of which fall under the invisibles category.

It also directed that all retail transactions are to be settled at a rate not exceeding 20 percent above the inter-bank market rates, thereafter, sold to customers who meet usual basic documentary requirements.

To further ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, the CBN also directed all banks to open FX retail outlets at major airports as soon as logistics permitted them.

The CBN has also continued to vigorously protect customers of Deposit Money Bank (DMBs) through its Consumer Protection Department.

In terms of development financing, the Bank under Emefiele’s watch has continued to act as a financial catalyst in specific sectors of the economy particularly agriculture, in its determination to create jobs on a mass scale, improve local food production, and conserve scarce foreign reserves.

In its bid to further increase the availability of foreign exchange to all end-users, the CBN equally reduced the tenure of its forward sales from the hitherto maximum cycle of 180 days to not more than 60 days from the date of transaction.

 

Bank Supervision

Towards achieving the mandate of ensuring safety and soundness of the financial system, CBN conducted a Risk-Based examination of all banks with High and Above Average Composite Risk Rating in June 2014 and those with Moderate and Low Composite Risk Rating in September 2014.

It also carried out the Foreign Exchange Examination of all banks in September 2014 as well as the routine examination of all discount houses and financial holding companies in October 2014. In January 2015, it carried out the Risk Asset Examination of 24 banks as at December 31, 2014.

Within the period, CBN commenced the implementation of the BASEL II Accord aimed at promoting financial system stability by ensuring that banks are adequately capitalized and have enhanced risk management systems.

 

Development Financing

Between February and June 2017, the CBN has intervened in the wholesale and retail segments of the forex market with over $5 billion, just as it has re-admitted operators in the Bureau de Change (BDC) segment, which receives $20,000 each for onward sale to low-end users.

Just recently, the CBN also introduced two new FOREX windows: a special forex window for Small and Medium Enterprises (SMEs) to enable SMEs import eligible finished and semi-finished items, and another Forex window for investors and exporters tagged: “Investors’ & Exporters’ FX Window” and has recorded about $1b deals in the last six weeks.

The CBN main objective of creating these windows is to boost liquidity in the forex market and to ensure timely execution and settlement of eligible transactions. Ultimately, CBN aims to achieve the convergence of rates between the inter-bank and Bureau de Change (BDC) segments, which we have begun to witness in the past few days.

New schemes and interventions introduced to complement the existing ones include: N300 billion Real Sector Support Fund (RSSF) established to help unlock the potential of the real sector to engender output growth, value added productivity and job creation.

N152 billion has been approved for five projects under RSSF; N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF) aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). N56.68 billion has been disbursed to five generating and five distribution companies under the scheme.

The Governor, Godwin Emefiele had maintained that the Bank has enough dollar power to defend the Naira and as such will not relent in the attainment of the goals of liquidity and stability.

How well the Bank has done can be assessed by how stable the forex market has been in recent times. At present, this strategy is yielding immense results as both the future and spot prices are stabilizing.

Reserve Management

It could be recalled that the CBN boss revealed that the country’s foreign reserves have exceeded $31 billion, a development which he said gives the central bank the firepower to sustain its forays into the foreign exchange market.

He also expressed optimism that Nigeria would exit the recession by the end of the second quarter of 2017, or latest by the third quarter of the year.

He added that the interventions of the central bank in the FX market resulted in the appreciation of the naira in the parallel market from N525 to N370 to the dollar, with the rate currently hovering at between N370 to N380.

Within the period of one year of Emefiele assumption of office, Schemes and interventions introduced to complement the existing ones include: N300 billion Real Sector Support Fund (RSSF) established to help unlock the potential of the real sector to engender output growth, value added productivity and job creation. N152 billion has been approved for five projects under RSSF; N213 billion Nigerian Electricity Market Stabilisation Facility (NEMSF) aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI). N56.68 billion has been disbursed to five generating and five distribution companies under the scheme.

 

Other Financial Institutions

The reform of the BDC segment of the Foreign Exchange Market was concluded on 31st July 2014, resulting in 2,501 BDCs with caution deposits and capital base of N35 million each. The bank issued a final licence to the National Mortgage and Refinancing Company (NMRC) to commence operation in 2015 under the Housing Fund Programme (NHFP).

It carried out further reforms of Primary Mortgage Banks (PMBs), with 32 PMBs fully capitalized as at June 30, 2014 while 10 were in the category given up to December 31, 2014. Licences of 21 PMBs which failed to recapitalize or had remained technically insolvent were revoked.

It also collaborated with the Federal Government and Development Partners to midwife the Development Bank of Nigeria that is envisaged to address the paucity of low interest and long-term funding for MSMEs in Nigeria.

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