CBN Discontinues N9.7trn Development Interventions

There are plans by the Central Bank of Nigeria (CBN) to end its interventions around development finance as it focuses on advisory roles on economic growth, especially, under the new governor, Dr Olayemi Cardoso, LEADERSHIP learnt.

In a document obtained by LEADERSHIP, the apex bank under the leadership of Cardoso will no longer be involved in direct development finance interventions. With this, there may be an end to the several intervention programmes of the CBN which include; the Anchor Borrowers Programme, the 100 for 100 Policy on Production and productivity (PPP)), the Real Sector Facility (RSF), the Nigeria Electricity Market Stabilization Facility amongst others of which there have been over N9.71 trillion in disbursements over the last three years.

According to the document, the CBN forays into development financing has been such that the lines between monetary policy and fiscal intervention have blurred.  It said:  “in refocusing the CBN to its core mandate, there is a need to pull the CBN back from direct development finance interventions into more limited advisory roles that support economic growth.”

Thus, it said, its advisory roles would include acting “as a catalyst in the propagation of specialised institutions and financial products that support emerging sectors of the economy. Facilitate new regulatory frameworks to unlock dormant capital in land and property holdings.

“Accelerate access to consumer credit and expand financial inclusion to the masses. It would also focus on de-risking instrumentation to increase private sector investment in housing, textiles and clothing, food supply chain, healthcare, and educational supplies.

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“These verticals have huge demand patterns, with the potential for high local inputs and value retention, and can be the basis for rapid industrialization and exercise CBN’s convening power to bring key multilateral and international stakeholder participation in government and private sector initiatives.”

It noted that economic policy proposals of the Administration identify a set of fiscal reforms and growth targets that will achieve $1.0 trillion GDP within eight years. “In reviewing selected BRICS and MINT countries, with large populations and similar developmental characteristics as Nigeria, it is interesting to identify macroeconomic indices that point to Nigeria’s economic trajectory, given the faithful implementation of the proposed economic reforms. In economies bigger than $1.0 trillion, these indicators include moderate inflation, sizable foreign reserves, and the capacity to quickly rebound from a cyclical economic downturn.

“It must be emphasised that CBN does not have a magic wand that can be waved at the current economic challenges. The problems facing the bank are large and complex. However, with focused leadership and sustained reforms, it is expected that over time, the country will gain open economic spaces, attract new investments, create employment, and give our hardworking and talented compatriots an opportunity for a more prosperous future,” it pointed out.

Cardoso, in the document, noted that the president, in his inaugural address, conveyed the urgent need to “clean up” the CBN and its Monetary Policies. “As a first step to this task, Mr. President’s appointment of a special investigator into the affairs of the CBN is currently underway. Further to the clean-up exercise, the President deemed it necessary to bring in new leadership to the helm of affairs at the Central Bank.

“I shall outline the challenges facing the Central Bank, introduce high-level proposals to address reformation challenges and discuss the role of a refocused Central Bank in supporting the economic agenda of the President Tinubu Administration.

“What are the current challenges facing the Central Bank of Nigeria? In assessing challenges currently facing the Central Bank of Nigeria, preliminary questions are being raised on addressing these challenges. Failure in corporate governance in CBN: How will issues of governance be addressed?

“Diminished institutional autonomy: How can public and financial systems’ stakeholder confidence be restored in the autonomy and integrity of CBN? Need to refocus CBN back to core functions: What needs to be in place to revert to evidence-based Monetary policies? Discontinuation of unorthodox Monetary policies and Foreign Currency management?

“Unorthodox use of Ways and Means spending: What controls can CBN develop to enforce statutory limits in the use of Ways and Means of financing public sector deficit? Backlog of FX demand: How much of the backlog is real versus speculative/ hoarding? Are there creative financing options for clearing the short to medium term backlog? Lack of clarity in fiscal and monetary relationships – where are the delineations, and what should be the limits in CBN’s fiscal side interventions?

“Inflation and price stability: What are the causes, and what is CBN’s proposed response to address inflation and price stability issues? Access to FX market and FX price discovery: What mechanisms exist to address FX rate unification under a willing buyer and willing seller arrangement?   What should be the role of the Central Bank in the FX market? Is there a need for interest rate realignment to money supply, inflation, and market realities?

“Current Financial System Stability: What is the current state of the financial system? Are CBN surveillance frameworks being updated proactively to track the expanding use of electronic payment systems by Fintech and Telcos?” he pointed out.