As NGX All Share Index records N3.18trillion growth
In pursuit of its agenda to diversify the economy of Africa’s largest economy to stimulate productivity and job creation, the Central Bank in two months in 2022, has released about N561 billion into key target sectors of the economy. Cumulatively, the Bank has funded its various intervention programmes with about N5.5trillion in the last eight years. BAMIDELE FAMOOFO writes.
The various intervention programmes of the Central Bank of Nigeria since June 2014, when Godwin Emefiele was appointed Governor of the Bank, has gulped about N5.5trillion.
Only between January and February in 2022, the Bank committed about N560.6billion to numerous intervention programmes, such as Anchor Borrowers Programmes, Commercial Agricultural Credit Scheme, Creative Industry Financing Initiative, MSMEDF, CBN Agribusiness, Small and Medium Enterprises Investment Scheme and the Real Sector Support Facility, among others with remarkable success in accelerating growth of the economy and reducing poverty across the country.
Breakdown of disbursements showed that between January and February 2022, the Bank disbursed N29.67 billion under the Anchor Borrowers’ Programme for the procurement of inputs and cultivation of maize, rice, and wheat, three crops that hitherto were significant concerns of FX demand.
These disbursements bring the total under the programme to over 4.52 million smallholder farmers, cultivating 21 commodities across the country, comes to a total of N975.61 billion.
The Nigeria Commodity Exchange has also been restructured to effectively aggregate excess outputs from the Bank’s ABP-financed projects, with the objective of moderating food prices.
The Bank also released N19.15 billion to finance 5 large-scale agricultural projects under the Commercial Agriculture Credit Scheme, bringing the total disbursements under the Scheme to N735.17 billion for 671 projects in agro-production and agro-processing.
In addition to these, the Bank disbursed the sum of N428.31 billion under the N1.0 trillion Real Sector Facility to 37 additional projects in the manufacturing, agriculture, and services sectors.
The funds sourced from the Real Sector Support Facility – Differentiated Cash Reserve Requirement (RSSF-DCRR), were utilized for both greenfield and brownfield (expansion) projects under the COVID-19 intervention for the Manufacturing Sector (CIMS).
“The various interventions in the real sector are targeted at enhancing the capacity of the economy to export and earn foreign exchange. It is to also reduce import propensity. The CBN is not competing with the government to take over their jobs”
Cumulative disbursements under the Real Sector Facility currently stand at N1.75 trillion, disbursed to 368 projects across the country. Under the 100 for 100 Policy on Production and Productivity, the Bank has disbursed the sum of N29.51 billion to 31 projects, comprising 16 in manufacturing, 13 in agriculture, and two in healthcare.
As part of its effort to support the resilience of the healthcare sector, the Bank also disbursed N8.50 billion to 6 healthcare projects under the Healthcare Sector Intervention Facility, bringing the cumulative disbursements to N116.72 billion for 124 projects, comprising of 31 pharmaceuticals, 56 hospitals, and 37 other services.
An additional tranche of N14.7 million was disbursed to five researchers under the Healthcare Sector Research and Development Grant.
To support households and businesses affected by the COVID-19 pandemic, the Bank disbursed N21.66 billion to 19,685 beneficiaries, comprising 12,044 households and 7,641 small businesses under the Targeted Credit Facility within the period. The cumulative disbursements under the TCF stood at N390.45 billion to 797,351 beneficiaries, comprising 660,096 households and 137,255 small businesses.
The Bank disbursed N11.11 billion to power sector players, under the Nigeria Bulk Electricity Trading Payment Assurance Facility (NBET-PAF), bringing the cumulative disbursements under this facility to N1.28 trillion.
The sum of N12.64 billion was also released to Distribution Companies under the Nigeria Electricity Market Stabilisation Facility – Phase 2 (NEMSF-2).
The cumulative disbursement under the NEMSF-2 thus stood at N232.93 billion. Both interventions were designed to improve access to capital and ease the development of enabling infrastructure in the Nigeria Electricity Supply Industry.
Professor Michael Obadan, Economist and member of the Monetary Policy Committee, said the Apex bank’s intervention programmes were very successful notwithstanding the security challenge in the country militating against it.
Obadan who made the disclosure while presenting a paper on the “Overview of Exchange Rates Management and Economic Diversification in Nigeria” at a seminar for Business Editors and Correspondents in Akure, Thursday last week, said: “The various interventions in the real sector are targeted at enhancing the capacity of the economy to export and earn foreign exchange. It is to also reduce import propensity. The CBN is not competing with the government to take over their jobs.”
He further disclosed that the interventions have positive implications for foreign exchange management as it encourages local production, creation of jobs, and reduction of poverty. The programmes are working but the insecurity challenges in the country have hampered its performance.
Reaffirming his commitment to diversify the economy through the various intervention programmes, Emefiele in his keynote address at the event noted that “For us, the CBN was to act as a financial catalyst by targeting strategic sectors that could create jobs on a mass scale and reduce the country’s import bills. To solve the immediate and long-term economic challenges of the country, we needed to create an enabling environment with appropriate incentives to empower innovative entrepreneurs to drive growth and development.”
Members of the Monetary Policy Committee also backed the CBN to continue with its intervention programmes which they considered unorthodox and a major bailout initiative for the economy.
“The overall medium-term outlook for the global economy remains uncertain as the war between Russia and Ukraine persists, alongside the ongoing COVID-19 pandemic. The sanctions against Russia are expected to have a considerable backlash against the global economy as Russia is an interconnected economy both in the global commodity and financial markets”
Economy scorecard
Relatedly, a review of the performance of the domestic economy by the MPC during its bi-monthly meeting which ended on March 22 in Abuja showed that macroeconomic fundamentals is gradually improving based on the efforts of the CBN to grow the Non-oil sector.
One of the barometers to measure economic growth being the performance of the stock market, MPC noted that nation’s equities market has recorded sustained improvements in the first quarter of the year ending March 2022 as All-Share Index (ASI) and market capitalization both increased significantly from 42,716.44 and N22.30 trillion on December 31, 2021, to 47,282.67 and N25.48 trillion on March 18, 2022, respectively.
“This prevailing positive performance was attributed to gradually improving macroeconomic fundamentals which support improved outcomes and returns on investments from companies quoted on the Nigerian Exchange Limited,” MPC revealed in its communiqué.
According to MPC, the banking sector has continued to be resilient with performance evidenced by the further moderation of the ratio of Non-Performing Loans (NPLs) to 4.84 per cent in February 2022 from 4.90 per cent in December 2021. The Committee also noted that Liquidity Ratio (LR) remained above its prudential limit at 43.5 per cent in February 2022, while the Capital Adequacy Ratio (CAR), moderated slightly to 14.4 per cent in February 2022 from 14.5 per cent in December 2021. Overall, Members expressed confidence in the Bank’s regulatory regime and commitment to maintaining stability in the banking system, urging the Management to sustain its tight regulatory surveillance.
On the external reserves position, the Committee noted the decrease in the level of gross external reserves to US$39.44 billion as of March 17, 2022, from US$40.21 billion on January 25, 2022, indicating a decrease of 1.95 per cent during the review period. It disclosed that moderate accretion to reserves reflects the duality of Nigeria’s position as an oil exporter and importer of refined petroleum products.
Outlook
The overall medium-term outlook for the global economy remains uncertain as the war between Russia and Ukraine persists, alongside the ongoing COVID-19 pandemic. The sanctions against Russia are expected to have a considerable backlash against the global economy as Russia is an interconnected economy both in the global commodity and financial markets. The extent of the backlash has, however, not fully crystallized but presents a significant downside risk to the recovery of the global economy if the crisis is not resolved immediately.
In the domestic economy, available data on key macroeconomic indicators suggest the likelihood of subdued output growth for the Nigerian economy for most of 2022. This is hinged on the dampening impact to the growth of rising energy prices in the domestic economy; tightening external financial conditions as some Advanced Economies pursue interest rate lift-off; as well as the persistence of legacy security and infrastructural problems. It is, however, expected that monetary and fiscal stimuli will remain in place to continue to support the recovery until the downside risks to growth and the upside risks to inflation dissipate substantially.
Accordingly, the Nigerian economy is forecast to grow in 2022 by 3.24 per cent (CBN), 4.20 per cent (FGN), and 2.70 per cent (IMF).
Concerns
MPC noted with concern the impact which the global price increase in petroleum and other products is having practically on all economies.
The Committee further noted that this has resulted in imported inflation on the Nigerian economy and believes that specific actions need to be taken to ensure that this trend does not continue given the adverse consequences and aggressive rising price level could have on the cost of living and purchasing power of Nigerians.
In the medium-term, MPC is hopeful that the proposed take-off of the Dangote Refinery in the course of the year would help to improve the supply of petroleum products in Nigeria.
MPC also notes that the rising price of diesel is compounded by the problem of inadequate electricity supply which has adversely impacted domestic prices. MPC advises the CBN Management and the fiscal authorities to take specific and urgent actions to avoid the shutdown of many power generating stations for turn-around maintenance, resulting in the current unwarranted shutdown of generating assets.
MPC is relieved that food inflation declined marginally due to good harvest but fears scarcity as we approach the planting season.
“The Committee is optimistic that with the high level of strategic grain reserves of the CBN, it is relieved that food prices would remain relatively moderate. MPC further advised Management to redouble its developmental finance initiatives aimed at boosting domestic food output which would help in moderating food inflation going forward, thereby moderating headline inflation,” Emefiele disclosed.
