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How CBN’s Efforts Helped Nigeria’s Exit From Economic Recession




While the President Muhammadu Buhari-led federal government rolled out the drums and clinked glasses in celebration of the Nigerian economy’s exit from recession last week, many, especially economic experts were unanimous in their view that apart from stability in the oil producing delta region, the Central Bank of Nigeria (CBN) deserve commendation for the key role in played in the struggle for the recovery of the economy from the strangulating hands of recession.

For them, the prompt and articulate complementary interventions of the central bank are some of the forces around which the economy derived its rebounding feat.

As it were, the exit has added a significant feather to the brag list of the governing All Progressives Congress (APC) who has boasted that the achievement is a manifestation of the hard work of the federal government. The party stressed that the country’s exit from recession was in tandem with the current administration’s forecast that the country will experience economic growth in 2017. “This is another demonstration that the President Buhari APC-led administration is one that keeps its promises”, the party said in reaction to the announcement by the National Bureau of Statistics (NBS) that the country has exited recession after five consecutive quarters of contraction.

Nonetheless, it did not fail to recognise the efforts of the CBN in helping to pull out the economy from the pit of hell by stabilising the nation’s money and capital markets, boosting investors’ confidence and ensuring that the country’s foreign reserve hit $32 billion, the highest mark since January 2015.

The report showed that the GDP grew by 0.55 percent, which is 2.04 per cent higher than the rate recorded in the corresponding quarter of 2016 (–1.49 per cent) and higher by 1.46 per cent points from rate recorded in the preceding quarter, (revised to –0.91 per cent from –0.52 per cent). Thus, quarter on quarter, real GDP growth was 3.23 per cent.

The verdict of many industry players is that the central bank actually helped to pull the economy out of the bricks of collapse; and it’s now making life better for Nigerians. Although there is a common argument that the impact of the economic recovery is yet to be felt by average Nigerians, experts, including Chief Responsibility Officer of Value Investing Limited, Seye Adetunmbi while applauding the efforts of the monetary and fiscal authorities, said, the economic recovery is a good news because it will give people psychological relief that Nigeria is no longer in recession and perhaps give people some rays of hope that things are looking up.

Evidence has shown that beyond its key mandate of banks and other financial institutions regulations, the CBN’s intensive complementary roll in recent time are yielding the desired results in no small measure. For instance, as part of efforts to get the economy back on the part of recovery and growth, the central has more than ever, performed some outstanding developmental functions, focused on key sectors of the Nigerian economy – financial interventions, agriculture and industrial sectors through the different departments of the bank.

Between 2016 and now, the CBN has made unprecedented interventions in the country’s agricultural sector. CBN in November 2015 rolled out a N40 billion Anchor Borrowers Programme (ABP) aimed at empowering about 600,000 farmers to increase capacity utilisation in the agro-allied industry from the current levels of less than 50 per cent to at least 70 per cent and achieve self-sufficiency in food production by 2020. That programme has since been achieving the desired result of creating a linkage between anchor companies involved in processing and small holder farmers (SHFs) of the required key agricultural commodities. To realise its dream, the CBN released a list of 41 items including prohibited from accessing its foreign exchange (Forex).

At the last counts, Nigeria now 4.5 metric tonnes of rice and out of this figure, 2.5 metric tonnes is from the CBN ABP. Prior to the launch of the scheme, Nigeria spent $2 billion annually on importation of rice. A reversal of that trend contributed to the recovery of the economy. According to the NBS report, apart from oil, the economic recovery was driven by improved performance of agriculture, manufacturing and trade sectors of the economy, where the CBN made series of visible interventions in the last year. The non-oil sector grew by 0.45 per cent in real terms during the reference quarter, the report said.

The CBN has entrenched stability in the currency market, while market confidence has rebounded following the introduction of various foreign exchange regimes including the Importers & Exporters and Small and Medium Enterprises (SMEs) windows; a development experts say was instrumental to the attractive level of capital imported into the country in the second quarter of this year, 2017. Data from the released few days ago by the NBS on its Q2-2017 Capital Importation Report, showed that the domestic economy recorded notable improvement in capital inflows review period, expanding by 97.34 per cent q/q and 71.98 per cent year-on-year to $1.79 billion, from $908.27 million and $1.04 billion respectively.

Portfolio Investment rose from 145.69 per cent quarter-on-quarter and 128.43 year-on-year to $770.51 million, accounting for the most inflows into the country in the three months to June, followed by Other Investments in the form of loans (95.02% q/q and 43.59 per cent year-on-year to $747.47 million), and Foreign Direct Investment (29.80% q/q and 48.88% y/y to USD274.37 million).

While the apex bank’s management stands firms on its determination to endear proper and more professional banking system in the country, it has assured of its continued intervention in the inter-bank Foreign Exchange market in order to sustain liquidity and stability in the sector.

The acting director, Corporate Communications Department at the Bank, Mr. Isaac Okorafor, gave the assurance in Abuja last Friday, stressing that the measures being taken by the Bank had yielded positive results as far as forex supply was concerned.

While acknowledging a marginal fluctuation in the exchange rate, he noted that the naira remained stable against other major currencies around the world; even as he observed that activities in the foreign exchange market remained dynamic. According to him, the interventions of the apex Bank were in line with its commitment to sustain liquidity in the market to meet genuine requests as well as deepen flexibility in the foreign exchange market.

Experts have however warned that while the authorities celebrate the exit from recession, critical efforts need to be taken to sustain the recovery and growth of the Africa’s largest economy.