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Dilemma Of Monetary Policy And Exchange Rate Management In A Recession: Potential Options For Nigeria



By Godwin Emefiele –

Distinguished Ladies and Gentlemen, today’s celebration comes at a time when our country is recovering delicately from devastating shocks and challenges which beleaguered us recently. At the height of the complexity and the accompanying economic recession, we all experienced untold hardship. While some businesses groaned under the prevailing difficulties others saw the opportunities to create a niche for themselves.

We must recognise that every challenge holds an opportunity to prosper. Even as we turn the corner away from the harsh conditions, the need for independent, daring, and innovative entrepreneurs in Nigeria is greater today than ever.

In line with these developments, and the privilege the conveners have kindly granted me on a topic of my choice; I will focus my talk on the need for young Nigerian graduates to change their mentality of the labour market. Rather than see yourselves as job-seekers, the time has come for you to see yourselves as job-creators.  Accordingly, I have provocatively titled my presentation: “A Mind-set for Succeeding in today’s Nigeria”. And my key message for today’s graduates is that regardless of the hues, cries, and complaints about Nigeria, this is STILL a land of limitless opportunities. You just have to go out there and find it!

As you may be aware, many of the eminent personalities seated here today were from humble beginnings. Yet, they took advantage of the kind of opportunities that existed in their days. Many of them probably had uneducated parents, yet today they are professors. Although I may not be as old as some of these professors, I believe that my days may not have been that different than theirs too.

Growing up, my parents, who themselves were uneducated persons, recognized that the only way to brighten my chances of a better future was to provide me with a good education. I witnessed the toils of my parents as they struggled to pay my school fees, sometimes using proceeds from a small palm-oil plantation we cultivated in our hometown. I sympathised with their inability to sufficiently support me through those periods, despite all the luxuries that some of my peers had. With their relentless reminders, I remained diligent and determined to accomplish my dream of becoming a leader in my chosen field of finance. With these same virtues, I joined the Nigerian-American Merchant Bank, an affiliate of First Bank of Boston, in 1987, and in 1990, joined Zenith Bank as a pioneer staff. It is these same virtues that propelled me to become the Bank’s Group Managing Director 20 years later, and then to be appointed the Governor of the Central Bank, by the special grace of God, in June 2014.

When I look back at some of my peers in school who focused on other things besides hard work and dedication to excellence, I see a different turn in their journeys through life. For this and many other reasons, I remain eternally grateful to God and my parents for the principles they imparted in me.

While my intent today is to awaken, and instigate the job and wealth creation spirits among today’s graduates, I know that many of you here expect me, as the Governor of the Central Bank of Nigeria, to talk about economic developments and policies. I will oblige you, albeit, very briefly.

Distinguished guests, as you would recall, the significant and persisting drop in commodity prices affected Nigeria’s economy quite adversely resulting in:

•Depressed GDP growth, which having grown by nearly 7 percent in previous years culminated in a 2016 recession;

•Rising Inflation, which peaked at 18.7 percent in January 2017 from 9.6 percent a year earlier;

•Depreciation of the exchange rate from as low as N155/US$1 in June 2014 to a peak of N525/US$1 in February 2017;

•Depletion of FX Reserves from as high as US$40 billion in January 2014 to about US$23.6 billion in October 2016;

•Decline in average inflows of foreign exchange into the CBN by over US$2.3 billion per month over a three-year period;

Distinguished guests, the vulnerabilities of Nigeria to those global shocks were amplified because of our over-reliance on the oil sector for FX revenue and for government finances. Even at the height of high oil prices, rather than save, we drained our buffers through an excessive dependence on imports, most of which could be produced locally. Based on our analyses and understanding of these developments, the Bank took a number of proactive measures many of which were, at the time, vigorously criticized. These policy measures include:

•For Monetary policy, we embarked on a cycle of policy tightening to rein in inflation using the MPR and the Open Market Operations;

•In External reserves management, we adopted demand management through the restriction of FX for imports of 41 non-essential commodities;

•On Exchange rate management, we took a number of actions to stabilize the exchange rate by abolishing speculators, bettors, round-trippers and rent-seekers. We also introduced the NAFEX and the Investors-Exporters FX Window to increase the market transparency;

•In Development finance, the Bank continued its financing activities in key high-impact sectors like Power, Aviation, Education, MSME, Agriculture, including CACs, ACGS, NIRSAL, the Anchor Borrower Programme, etc.

Distinguished ladies and gentlemen. In light of these and other policy responses, we are delighted that the economy has turned the corner with our worst days clearly behind us. For example:

•GDP recovered after five quarters of continuous contraction recording positive growths of 0.7 and 1.4 percent in quarters two and three of 2017, respectively, and signalling an exit from the recession;

•Inflation declined from a peak of 18.7 percent in January 2017 to 15.9 in November;

•Exchange Rate appreciated significantly from over N525/US$1 in February 2017 to about N360/US$1 today, tapering premium across various windows and segments of the market;

•FX Supply has improved since the establishment of the I&E Window, with autonomous inflows of over US$10 billion through this window alone from April 2017 to date;

•FX Reserves has recovered significantly from a low of just over US$23 billion in October 2016 to about US$35.2 billion by November 27, 2017;

•Improvement in the World Bank’s “doing business indicators” for 2018 as Nigeria, with the country rising 24 places to rank 145 out of 190 countries;

•Significant Boost in Local Production which is due to our development finance efforts and the dogged implementation of our FX policies. Today many local manufacturers are reporting major boosts to their revenue and profit.

Distinguished guests, this boost in local production is very important because with a population of over 180 million people, and predicted by the United Nations to be the third largest in the World by 2050, herein lies a huge opportunity for our graduates to turn whatever challenge they may be facing into opportunities. Today, there are many examples of young people who rather than complain about what the government did not do for them, identified common problems and needs of society and created a solution that has turned them into job-creators and millionaires.

In Nigeria, it is not uncommon for graduates to nag and quip: No jobs! Why is government not creating jobs? We go die oh! Many will complain about the state of the economy and sit back for government to offer them employment. Notice that in earlier paragraphs I enumerated rising unemployment as one challenge during the recent economic downturn, but I did not list it among improving indicators in a later paragraph. This is because the problem of high unemployment is indeed still high. I do not intend to sour your mood, but to open your minds to the great possibilities that abound even in the midst of these challenges.

A quick historical scan of other nations, especially advanced ones will reveal that notable strides in economic and political development occurred during periods of great challenges. In the United States for example, it is on record that 16 out of the 30 corporations that currently constitute the Dow Jones Industrial Average started during economic downturns. For example, Walt Disney Corporation was founded during the recession of 1923-24. Hewlett-Packard Corporation began in 1938 during the end of the Great Depression and Microsoft Corporation was conceived during the 1975 recession, and many other examples too many to mention here. The above historical experience, among many other reasons justify why the subject of entrepreneurship and job creation is very relevant and suitable at this auspicious occasion.

These entrepreneurs and innovators did not wait for their government to give them jobs; they created jobs for the economy. It may surprise you to note that some of the wealthiest persons on earth are entrepreneurs who began with modest start-ups. Among them are Microsoft’s Bill Gates, Amazon’s Jeff Bezos, Apple’s Steve Job and Steve Wozniak, Google’s Larry Page and Sergey Brin, Zara’s Amancio Ortega, Facebook’s Mark Zuckerberg, and Alibaba’s Jack Ma. These famous men started very small, some in their garages. They were creative. They saw opportunities where others saw obstacles. They changed their mind-set to realise their potentials. They didn’t wait for government to give them employments or contracts; instead they created jobs and created humongous wealth. Today they are celebrated not just as successful entrepreneurs, but as some of the richest men on earth.

I am sure that some cynics may say that these people succeeded because they are in a society where things work and where the government does a lot for their people. But you must note that Having graduated from a federal university, the government has likewise supported you by subsidising your education when compared to the cost of private universities in Nigeria today. Your parents have also sufficiently played their roles and had so far made material decisions on your behalf. Some even decided the course which you eventually studied and are graduating from today. But alas! The time has come for you to stand up and be counted.

So, I will bring it home and tell us about people who are succeeding in Nigeria, where things are erroneously assumed not to work. I will not tell you about the Aliko Dangotes, Cosmas Madukas, or the Jim Ovias of this world. Instead, I will tell you about young people like you, most of whom are less than 30 years old, who are succeeding in Nigeria even in the midst of enormous challenges. I am talking about creative, innovative and hard-working entrepreneurs who are not blind to opportunities.

Many of you may know Jason Njoku, who today is a very wealthy young man. He is the founder of iRoko TV. When he launched his home-grown movie platform in December 2011, he saw the gap in video rental business and leveraged on existing technology. Today that effort has metamorphosed into a full-blown TV service. You may also know of Obinna Ekezie, who established as a home-grown novelty and Nigeria’s first digital travels platform. Today, both iRoko TV and have been independently reached out to by Tiger Global, a multi-billion-dollar American investment firm. This is because of the value they have successfully created.

Let me mention also Iyinoluwa Aboyeji who is only is 26 years old and has already founded two globally successful companies. First was Andela, a company that trains software developers and matches them with global companies. As you may know, that company, which is less than 4 years old, has already secured US$24 million in funding from Mark Zuckerberg, the founder of Facebook. Indeed, that company is one of the key reasons Mark Zuckerberg visited Nigeria. As if not satisfied, Mr. Aboyeji has gone on to establish Flutterwave, another company, which will basically make it easier for banks, businesses, and you to pay for things with your phone. He has already raised $10 million from U.S. investors.

Onyeka Akumah saw the gap that existed in agriculture finance between farmers who needed capital infusion and white-collar investors yearning for profitable returns. Consequently, he set up Farmcrowdy, a business which provides a guaranteed platform for people to invest their funds in agriculture. By guaranteeing the investment he has effectively de-risked the lending, making it attractive for investors and by the same token ensuring regular flow of loanable funds to participating farms. He took advantage of the existing internet and social media platform to connect demand and supply of funds to agriculture.

Now this story might be familiar to many of you here. Of the 1.5 million students that take JAMB every year, less than half pass. As a result, many are forced to wait a whole year before they can take it again, delaying school all the while. Kelechi Iroanya and Tola Odumosu saw this, not as a problem but as an opportunity. So, they created Prepterra, a digital solution to examination preparations that offers students online resources for various subjects with over 40,000 examination questions, answers, and explanations. Since their first year in the market, they have already recorded significant success with glowing accolades from users.

Similarly, Godwin Benson, a recent graduate of Engineering from the University of Lagos, was at some point a private tutorial teacher in Lagos. He would move from place to place looking for parents who want good private teachers for children. But he soon discovered that many parents had difficulty finding good teachers while many good teachers had trouble finding the right clients. I am sure many parents in this audience can relate to that frustration. This common problem for many people led Mr. Benson to establish Tuteria. This company now helps millions of Nigerian households learn by connecting parents with subject matter experts in their neighbourhood. With just one click, you can find excellent and pre-vetted teachers for many subject areas, including cooking!

A final example is OgaTaxi. Founded by Michael Nnamadim and Ameh Idoko, OgaTaxi is an indigenous mobile app that connects you with a taxi through the convenience of your phone. Uber, Easy Taxi, Taxify and the rest are all imports. OgaTaxi, as is obvious from the name, is 100 percent Made-in-Nigeria and boasts the most affordable rides!

There are also other ingenious and very successful start-ups in Nigeria like Jumia, Konga, Suregifts,, ThriveAgric, and Paystack, to mention but a few. While these companies are all different in their own rights, one common characteristic that binds them all together is that they all identified common everyday problems in the society and saw an opportunity in fixing them thereby making a name for themselves. All these start-ups which I listed, and more, are making giant strides. They did not wait for government or their parents to find jobs for them. These are people that do not outsource their decision-making. They engage with the world around them, undergoing the difficult task of making choices and living with the consequences, no matter the colour. They looked at everyday problems and saw opportunities and developed their ideas.

I challenge you, the next time you feel an urge to complain about something; the next time you see a complaint bubbling up inside of you, don’t complain! Rather interrogate it. Analyze it. Ask yourself what is the real problem here? Is anyone doing anything to fix it? If they are, is it the best solution? Can you make it better? If yes, then go ahead and fix it. A young man was once standing on a fiercely cold and dangerously wintery evening waiting for a taxi in Paris. And he was very frustrated. But the same situation occurred right in his home city of San Francisco, where he had to wait for a long time for a taxi. Rather than continue to complaint endlessly about how difficult it was to get a taxi, he interrogated and analysed the problem. He found that no one was doing anything to fix this problem, and took advantage of this opportunity to develop a solution. And that is how Travis Kalanick was inspired to create Uber, a phone-enabled taxi service that allows you the comfort of ordering a taxi from anywhere. That company is now worth almost US$100 billion, and many of you in the audience have probably used it. In fact, I have used it several times around the world.

Given that, as Aristotle said, “ideas rule the world.” But without a progressive mind-set ideas are futile. What exactly differentiates you from these successful entrepreneurs – Jason Njoku, Onyeka Akumah, Mark Zuckerberg, Bill Gates? The answer is simply, mind-set. They basically changed their mind-set to achieve their potentials. As Billionaire entreprenuer, Michael Bloomberg was quoted: “being an entrepreneur isn’t really about starting a business. It’s a way of looking at the world: seeing opportunity where others see obstacles, [and] taking risks when others take refuge.”

I challenge the graduands to recognize the opportunities presented by various aspects of our environment, be self-motivated, create innovative ideas and turn these ideas into profitable ventures. I encourage you to be hardworking and farsighted. As Hillary Clinton once said, “whatever your dreams are today, dream even bigger. Wherever you have set your sights, raise them even higher”. Be independent and original in your ideas. Dedication, discipline and thoroughness should always be in your kitty. Be creative, and innovative. Aspire, know yourself and define your character.

Ladies and Gentlemen, at this juncture, I suspect that many of you may cite the absence of start-up capital as a key constraint to entrepreneurship in Nigeria. The usual fear is that banks will not make available the money required to commence. As part of the efforts to address the challenges of unemployment, promote entrepreneurial spirits among Nigerian youths and enhance the spread of small and medium enterprises, the Central Bank of Nigeria (CBN), has designed and formulated a number of policies and programmes for direct real sector intervention. Our Youth Entrepreneurship Development Programme (YEDP), which we run in collaboration with banks and National Youth Service Corp (NYSC) was launched on March 15, 2016. This enabled current or recently discharged Corp members with entrepreneurial acumen to receive a concessionary financing of up to N5 million for innovative and job creating ventures. As you leave the University and proceed to the NYSC, I encourage you graduands to take advantage of this.

In addition, there is also the N220 billion CBN initiative to support micro, small and medium scale enterprises (MSMEs). This is aimed at encouraging entrepreneurship development and creating an environment that supports business success. It is our firm belief that our modest contributions are already yielding the expected dividends for all to see. These schemes are set up solely for your use, please take advantage of them.

Yes, it is true that government is expected to provide the impetus and enabling environment, and that there are currently problems associated with the ease of entrepreneurs getting access credit. Let me state that the Federal Government, including the CBN, is encouraging the Deposit Money Banks and other development finance institutions to create awareness through which innovative entrepreneurs can access credit with a view to creating opportunities for job creation. At the moment, the CBN is reviewing the broad frameworks of its development financing funds with a view to creating new channels through which entrepreneurs with great ideas can access credit with minimal effort.

In closing, I will like to remind the graduating students that the University of Nigeria Nsukka has equipped you to rule your world; go, therefore, and rule your world! In the spirit of one famous American President, I challenge you today to ask not what Nigeria can do for you. Rather, ask what you can do for Nigeria.

Being a lecture by the Governor of Central Bank Of Nigeria, Mr Godwin Emefiele, at the 47th convocation ceremony of the University Of Nigeria, Nsukka.





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