OF
CENTRAL BANK NIGERIA
AN BY
ADDRESS
GOVERNOR GODWIN I. EMEFIELE, CON
AT THE
2018 ANNUAL BANKERS' DINNER
CONTINENTAL HOTEL, VICTORIA ISLAND
LAGOS
30 NOVEMBER 2018
Gov. Godwin Emefiele, CON
Address at the 2018 Annual Bankers' Dinner
Lagos, 30 November 2018
_______________________________
Opening Pleasantries- Good evening distinguished
ladies and gentlemen. It is indeed a pleasure to be with
you this evening, and to use this occasion to step back
from the day-to-day concerns of inflation, external
reserves and exchange rate, to consider a number of
the deep-seated, long term factors shaping Nigeria's
economy. I am also delighted at the opportunity to once
again address a gathering of eminent personalities,
which includes critical stakeholders in our nation's
financial sector, as well as members of the Chartered
Institute of Bankers of Nigeria.
2. Before I go any further with my address, please
permit me, to specially thank the leadership of the
Chartered Institute of Bankers of Nigeria ;
particularly Dr Uche Olowu, Mr Seye Awojobi and
their team, for their relentless efforts to ensure the
success of today's event. I want to also extend my
profound gratitude to the Managing Directors/Chief
Executive Officers of our banks and other financial
institutions who have found time to be here despite
their very busy schedules.
3. I must not forget to accord honour to whom it is
due. Permit me, ladies and gentlemen, to
congratulate Dr Uche Olowu on his well-deserved
election as the President and Chairman of the
Governing Council of this great institute. I also wish
to thank the immediate past President, Prof. Segun
Ajibola and the outgoing Council members for their
outstanding performance, and total commitment to
the pursuit of the vision and mission of the institute.
I sincerely thank each and every one of you for
your respective roles in making this institute one of
the leading professional bodies in the country.
4. Likewise, I welcome my colleagues from the CBN,
especially the Deputy Governors, Departmental
Directors, Special Advisers, Special Assistants,
and other senior management of the Bank who are
here present. And to everyone here seated I say:
thank you for coming.
5. When I addressed this gathering five years ago, I
acknowledged that a night such as this should not
be dominated by excessive speeches. It should be
a time to dine, merry and unwind after a hectic
year. Though I am mindful of the need to allow you
relax and enjoy the conviviality, it will be a great
disservice to you and to our dear nation if I failed to
adequately draw your attention to key economic
and financial developments, both historical and
expected.
6. Distinguished ladies and gentlemen, my address
this evening is focused on "Strengthening the
Economic Recovery Process in Nigeria". I am
pleased to have this opportunity to share my
perspective on some of the key issues that the
Nigerian economy has faced over the past 3 years,
which includes the factors that led to the economic
recession in the 1st quarter of 2016, and the
measures we took at the Bank along with the Fiscal
authorities to support our recovery from the
recession by the 2nd quarter of 2017.
7. In my inaugural address to Nigerians after
assuming office as the Governor of the Central
Bank of Nigeria in June 2014, I indicated that my
mandate would be to ensure that the Central Bank
of Nigeria is more people focused, as its policies
and programs would be geared towards supporting
job creation and fostering inclusive growth, in
addition to key macroeconomic concerns such as
inflation and exchange rate stability. This idea of a
people focused central bank is more relevant
today, given the global headwinds we face as a
nation and the Central Bank of Nigeria remains
committed to supporting measures that would
wean the nation from its dependence on imported
goods; your Central Bank today is more committed
to creating wealth and putting in place strong
policies for creating jobs for our growing youth
population; your Central Bank today is ever more
committed to promoting a more stable and resilient
financial system.
8. Several economic and financial experts continually
attempt to analyse and pre-empt the policy actions
of the CBN. To the extent that these endeavours
are based on rational expectations, we wholly
welcome the effort. Notably, some of their
conclusions are incongruent to ours. As I have
always maintained, I am not surprised at this
outcome since most of those analysts,
unfortunately, rely on limited or utterly incorrect
information. Let me reiterate that the CBN will
always act in good faith, with the best available
information and in cognizance of current economic
conditions, to pursue price and financial system
stability, support job creation on a massive scale
and ensure a more inclusive growth in the
economy. After a wave of scathing criticism that
trailed some of our past policies, many of these
measures are today being widely applauded as
brilliant and conscientious actions. As
policymakers, our perspectives are typically
different from many talking heads, as our data,
information sources and outlook remain superior. I
therefore enjoin our critics to avoid being hasty in
their condemnation of our policies. Some policies
take time to bear fruit.
9. Let me at this point briefly explain the
macroeconomic and geopolitical contexts in which
the Central Bank and the nation have been
operating.
A Quick Overview
10. On the global scene, a number of recent
developments have noticeably impacted outcomes
and outlooks especially in emerging market
economies including Nigerian. These include:
i. Rising global interest rate due to sustained
tightening stance in advanced economies which
consequently and unfortunately heightened
fragilities, imbalances and vulnerabilities in
emerging markets. The Fed fund rate was raised
steadily to 2.25 percent in September 2018 with a
promise for one more hike before the end of 2018
and three more in 2019. Similarly, the Bank of
England raised its policy rate in August 2018 for the
first time since 2008. Some emerging markets
economies, including India, Indonesia, Mexico and
Turkey have also raised interest rates in response
to that shock;
ii. The consequent huge capital flow reversals in
emerging markets that led to immense pressures
on exchange rates, FX reserves, and sharp losses
in the capital markets. Argentina, Brazil, South
Africa, Turkey and Russia have already
depreciated their currencies significantly due to this
shock;
iii. Uneven fluctuations in the international prices of
commodities including crude oil, gold, cocoa, etc.
After hitting $86 per barrel in October 2018, oil
prices have dropped by over 30% as at November
25, 2018;
iv. Profound geopolitical and trade tensions (including
between US and China, US and Iran, Russia and
Western economies etc.) which are impacting the
dynamics of global trade and consequently the flow
of capital;
v. The rising incidence of protectionism, nationalism,
and anti-globalization especially in the western
hemisphere; and
vi. Uneven growth of the global economy
accompanied by a tepid short-term outlook.
11. What are the likely implications of these issues on
Nigeria? And what steps can we take to avoid a
repeat of the economic slowdown that occurred
between 2016 and 2017? Given the structure of
our economy, CBN's attention is primary focused
on three factors, including;
•
One, rising trade tensions between the US and
China could taper global growth, and by extension
demand for commodities such as crude oil
• Second, how to ensure that Nigeria's economy is
insulated from the adverse consequences facing
emerging and frontier markets, due to rising rates
in the United States.
•
Third, what is the likely impact on the crude oil
market from the sharp rise in US oil production,
which currently stands at 11.7m barrels per day
and is likely to rise to over 14m barrels in 2 years?
12. As you may recall, Nigeria's political-economy
experienced significant challenges over the last
few years revealing its structural deficiencies
particularly with regards to its dependence on
crude oil, as a major source of its revenue and
foreign exchange, as well as over dependence of
our people on imported items even when these
goods could be produced locally. The 60 percent
decline in crude oil prices between 2015 and 2016
helped shape the trajectory of our economy,
ultimately triggering the economic recession in Q1
of 2016.
Road to Recovery
13. The country's overdependence on crude oil for FX
revenue meant that shocks in the oil market were
transmitted entirely to the economy via the FX
markets as manufacturers and traders who
required forex to purchase their inputs as well as
goods, were faced with a depleting supply of
foreign exchange in the country. The impact of this
decline on our reserves was evident in the rise in
the value of the US Dollar relative to the Naira; and
a rise in the Consumer Price Index due to the
increase in the cost of imported inputs and goods.
In a bid to contain rising inflation and to cushion the
impact of the drop in FX supply on the Nigerian
economy, the Bank took three bold steps;
14. First, The CBN tightened money supply in order
contain inflation while improving yields in local
bonds, which attracted the attention of foreign
investors. Second, we analyzed our import bill and
encouraged manufacturers to consider local
options in sourcing their raw materials, by
restricting access to foreign exchange on 41 items.
Third, the Investors and Exporters FX(I&E) window
was introduced, which allowed investors and
exporters to purchase and sell foreign exchange at
the prevailing market rate.
15. The impact of these three measures led to an
increase in foreign exchange inflows into the
country; Transactions in the I&E FX window
reached $24 billion ($6 billion net inflows) in 2017
and Nigeria's foreign exchange reserves rose to
over $48billion at the end of May 2018 from $23bn
in October 2016
Foreign Exchange Reserves ($billion)
50.0
42.5
35.0
27.5
20.0
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22
16. With improved availability of foreign exchange, the
exchange rate at the I&E FX window has remained
stable over the past 12 months and the parallel
market exchange rate premium has narrowed
significantly. At the BDC segment, we saw a
significant appreciation of the Naira from over
NGN525/US$ in February 2017 to about
NGN361/US$ today. Rates at the I&E window also
appreciated from nearly NGN382/US$ in May 2017
to just over NGN360/US$.
NGN - USD Convergence Across the Various Markets
400.
375.
350.
325.
300.
27/11/20 07/03/21 15/06/21 23/09/21 01/01/22 11/04/22 20/07/22 28/10/22
NGN Spot NAFX Index
NIFX Index 6m NDF
17. GDP: After five quarters of uninterrupted GDP
contraction (beginning from 1st Quarter of 2016),
the economy exited from the recession during the
second quarter of 2017. The recovery has been
sustained for five consecutive quarters. Though
the pace of GDP growth slowed from 1.95 percent
in the first quarter of 2018 to 1.50 percent in the
second quarter, short-term outlook continued to
strengthen with average growth projections of
about 1.9 percent for 2018
Quarterly Growth in GDP Y-on-Y
3.50
2.00
0.50
-1.00
-2.50
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018
18. The measures taken by the CBN also had an
impact on inflation. Following a period of rising
inflationary pressure which peaked at 18.7 percent
in January 2017, the Nigerian economy witnessed
eighteen straight months of disinflation, as inflation
dropped to 11.1 percent in July 2018. A slight
uptick to 11.25 percent was, however, recorded in
October 2018 due to rising food prices.
Inflation Year-on-Year
20.00
15.00
10.00
5.00
Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18
Inflation MPR
19. Activities in the manufacturing sector also
witnessed significant improvement between
August 2016 and August 2018, as the Primary
Manufacturing Index rose from a low of 42% in
August 2016 to 57% in August 2018. This
development was attributed to sustained supply of
foreign exchange and stability of the naira.
20. We were also aware that in order to ensure
sustainable growth, efforts must be made to
address factors that constrained the growth of
businesses in Nigeria. This led to the set-up of the
enabling business committee PEBEC, chaired by
His Excellency the Vice President. PEBEC was
mandated to unlock bureaucratic constraints to
doing business in Nigeria. The CBN and PEBEC
worked together to improve access to credit for
underserved Nigerians, through the set-up of a
National Collateral Registry and the passage of the
Credit Bureau Act. As a result of these initiatives in
addition to other reforms, Nigeria moved up by 24
points in the World Bank's 2017 Doing Business
Rankings. (145 from 167 in 2016)
Key Takeaways
21. The ongoing global tensions as well as the
economic recession in 2016 provided us with some
key lessons on some of the steps we need to take
if we intend to improve the wealth base of the
nation. Our understanding of the nature of
Nigeria's domestic imbalances indicates that two
key factors accentuated our vulnerability to global
shocks. The first is the diminished total factor
productivity in Nigeria due to a low and inadequate
infrastructural base. The second is our
overdependence on imports for both capital goods
and domestic consumption.
22. With regards to the inadequate infrastructural
base, I am aware of ongoing efforts being made by
the fiscal authorities in constructing critical roads
networks such as the 2nd Niger Bridge, Lagos -
Ibadan Highway, Abuja - Kano road network, and
the rail lines between Port-Harcourt - Maiduguri,
Itakpe - Ajaokuta and Lagos - Kano. These
measures will go a long way in reducing the
logistics cost of doing business in Nigeria, while
opening up new markets for farmers, traders and
manufacturers.
23. With regards to our overdependence of imports,
the economic recession triggered mainly by the
drop in crude oil prices, only strengthened the case
for the need to move from a nation wholly
dependent on consumption, to a nation that
produces a large proportion of what it needs,
particularly in areas where the resources or inputs
needed for production are widely available across
the country. This thought process shaped our
decision to impose the restriction on access to
forex for 41 items that can be produced in Nigeria.
24. There has been considerable discourse
particularly on whether the restriction on access to
foreign exchange for 41 items is driving local
production, with some nay-sayers stating that it has
constrained productivity and growth in the
economy. Based on our internal research
conducted at the Central Bank of Nigeria, there is
strong support that the recovery of our economy
from the recession may have been much weaker
or even negative, without the implementation of the
restriction on 41 items. Our research supports the
conclusion that the combination of the restriction
on 41 items along with other measures imposed by
the fiscal and monetary authorities has helped to
promote the recovery. Any attempt to reverse the
course of this actions may have untold
consequences on the growth trajectory of our
economy particularly in our push to diversify and
restructure our economy. In fact,
recommendations are being made to the CBN that
the list of 41 items be expanded to include other
additional items that can be locally produced.
25. Second, many entrepreneurs are taking advantage
of this policy to venture into the domestic
production of the restricted items with remarkable
successes and great positive impact on
employment. The dramatic decline in our import bill
and the increase in domestic production of these
items attest to the efficacy of this policy. Noticeable
declines were steadily recorded in our monthly
food import bill from US$665.4 million in January
2015 to US$160.4 million as at October 2018; a
cumulative fall of 75.9 percent and an implied
savings of over US$21 billion on food imports alone
over that period. Most evident were the 97.3
percent cumulative reduction in monthly rice import
bills, 99.6 percent in fish, 81.3 percent in milk, 63.7
percent in sugar, and 60.5 percent in wheat. We
are glad with the accomplishments recorded so far.
Accordingly, this policy is expected to continue with
vigor until the underlying imbalances within the
Nigerian economy have been fully resolved;
26. Development finance: In continued recognition of
our role as an agent of development and aimed at
ensuring self-sufficiency to reduce Nigeria's
excessive dependence on imports, the CBN
invigorated its development finance activities. We
have maintained a particular focus on supporting
farmers, entrepreneurs as well as small and
medium scale businesses, through our various
intervention programs such as the Anchor
Borrowers Program, Nigeria Incentive-Based Risk
Sharing System for Agricultural Lending (NIRSAL)
and the National Collateral Registry. The CBN
recently introduced the Real Sector Support fund;
a facility meant to provide cheap funding at no
more than 9 percent to new projects in the Agric
and Manufacturing sectors; aimed at boosting
output and creating jobs.
27. In the agriculture sector, the Anchor Borrower
Programme (ABP) has ensured that Nigeria
emerged from being a net importer of rice to
becoming a major producer of rice, supplying key
markets in neighboring countries. As at October
2018, a total number of 862,069 farmers cultivating
about 835,239 hectares, across 16 different
commodities, have so far benefited from the
Anchor Borrowers programme, which has
generated 2,502,675 jobs across the country.
Anchor Borrowers Program
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
2015 2016 2017 JAN- NOV. 14,
2018
NO. OF FARMERS (862,069) NO. OF HECTARES (873,053)
28. It is in light of the success of the Anchor Borrowers
Program with regards to cultivation of rice and
maize that the Monetary Policy Committee in its
last meeting on the 21st of November 2018
recommended that the Anchor Borrowers program
be applied to other areas such as palm oil,
tomatoes and fisheries to mention a few.
29. Our efforts at supporting small scale farmers and
SMEs is based on our awareness of the critical role
they can play in supporting our economic recovery
and growth, as well as in creating job opportunities
for millions of Nigerians. So far, the CBN has
through its MSME fund disbursed over N100Billion
to the MSME sector, but we still feel a lot can be
done. Under the auspices of the Bankers
Committee, the sum of over N60 billion has so far
been set aside under the AGSMIES fund to fund
Micro Small and Medium enterprise businesses in
the Agriculture and Manufacturing sectors of our
economy. The CBN recognizes that the greatest
challenge confronting MSME's and local farmers is
access to credit, and that to unlock the growth
potentials in our country; these groups must
access funding seamlessly. In response to this
challenge, the CBN will in due course take action
that will directly bring Banking services to the rural
communities through the licensing of a national
Micro Finance Bank, which will have a presence in
all local governments in Nigeria, thereby
supporting the channeling of credit to our rural
communities. We will continue to explore ways, in
partnering with the fiscal authorities, on how we
can best provide farmers and SMES with the
support they need to expand their operations.
30. The other day when I visited an unnamed popular
supermarket in Lagos, there was a big contrast
between my visit to the shop 5 years ago, and my
visit in November. What was apparent was the
huge increase in the number of made in Nigerian
processed goods that were being sold in this store;
From locally produced rice to well packaged ready
to use tomato stew, dried fruits and also cassava
chips. As I walked round the shop I could see the
huge potential of Nigerian entrepreneurs, as they
developed products which could compete with their
peers in other climes. I could also imagine the
number of people who are being employed by
these entrepreneurs to support production of these
goods. For us to grow as a nation, we must
continue to encourage these businesses as they
do more than just provide goods, they help to
sustain the vitality of the communities in which they
live and work.
31. Financial Inclusion - Cognizant of the fact that
close to 40% of adult Nigerians do not have access
to financial services, the bank implemented a
series of steps that will help drive our efforts aimed
at building a more financially inclusive society.
Some of these measures include the Agent
Banking Guidelines and the Shared Agent Network
Facility (SANEF), both of which are intended to
deepen penetration of agent networks in
underserved locations across the country. The
recent launch of the policy on Payment Service
Banks in October 2018, is an additional step aimed
at leveraging on the distribution networks of non-
bank entities, such as Fast-Moving Consumer
Goods companies, Fintechs, and Mobile Network
Operators, in providing financial services to under-
served communities. With these schemes in place,
we believe that over the next 2 years, over 80% of
Nigerians will have access to financial services.
32. Credit Allocation: As part of its long-term strategy
for strengthening the Nigerian economy, the Bank
established initiatives to resolve the underlying
challenges to long-term GDP growth, economic
productivity, unemployment and poverty that had
pervaded the economy over the past decades.
Hence, the CBN established the Credit Bureau and
the National Collateral Registry to improve access
to credit in the domestic economy. We believe
these measures will help to instil a stronger credit
culture and unlock access to finance for deserving
Nigerians, including those who may not have fixed
assets to provide to banks as collateral.
33. Furthermore, to spur bank lending to high-impact
sector, the Bank, at its July 2018 MPC, pledged to
refund CRR to banks under certain conditions.
Banks that bring proposal for funding of new
projects or expansion of existing ones in agriculture
and manufacturing sectors will, accordingly, qualify
for CRR refund of up to 100 percent. It is our
expectation that banks would use this opportunity
to expand credits to the real sector.
34. Risk Based Supervision: The recent weakening
of the Naira, following the shift to a more flexible
foreign exchange mechanism, impacted somewhat
on the balance sheets of domestic banks. To
guarantee financial stability as Nigeria continues
with flexible exchange rate system, the CBN took
a number of steps, including:
Monitoring compliance of supervised institutions
o
with the foreign exchange management
framework issued in June 2016 through our risk-
based supervision methodology, which also
involved reviewing international trade and foreign
exchange operations of local banks;
Monitoring the financial position and performance
o
of supervised institutions;
Assessment of the risk profile and governance
o
management practices of banks
In the event of major deteriorations on any key risk
o
indicator, we engaged with the affected bank in
order to mitigate concerns and shore-up their
capital base.
35. As I have always emphasized, it is our collective
duty to ensure that the potentials and prospects of
the Nigerian economy is optimally realized. The
ongoing economic recovery requires the joint
efforts and wise counsel of everyone seated here,
if we must make giant strides forward. The CBN is
more determined now than ever to remain at the
forefront of the effort to ensure that the rebound is
not overturned.
Peer Review of Emerging Market Economies
36. Ladies and gentlemen, in assessing Nigeria's
recovery efforts and performance, it is essential to
conduct a comparative assessment of our peers.
Strikingly, it will be discovered that Nigeria did not
fare badly vis-à-vis other emerging market
economies like Brazil, South Africa, Turkey, and
Argentina, that had similar economic experiences.
37. Amidst the growing challenges, Nigeria has
managed to keep real GDP growth positive and
has avoided a double-dip recession in contrast to
some other emerging markets economies.
38. In comparison and following its 2016 contractions,
the South African economy recorded a double-dip
recession with renewed contractions of 2.6 and 0.7
percent in the first and second quarters of 2018,
respectively. In Argentina, though the economy
was in recession throughout 2016, moderate
upticks which peaked at 1.9 percent quarter two of
2017 ended that recession. However, the
Argentinian economy shrank by 4.0 per cent in
quarter two of 2018, bringing the country to the
brink of another recession.
39. The Brazilian economy had been in recession
since 2015 and only emerged from it the first
quarter of 2017 with a growth rate of 1.0 percent.
Since then the growth has slowed progressively
until the last quarter of 2017 when growth remained
flat. However, the economy is gradually
rebounding and has recorded 0.1 and 0.2
percentage growth rates in the first and second
quarters of 2018.
40. Given rising yields in advanced markets, capital
outflows from emerging markets have increased
tremendously. This has led to substantial
exchange market pressures in many emerging
markets with FX reserves falling about 25.2
percent in Argentina, 9.6 percent in Turkey, and 2.1
percent in South Africa since the beginning of the
year. Also, significant currency depreciation was
recorded in Argentina (by 101 percent), Turkey (43
percent), Brazil (19 percent), Russia (19 percent)
and India (16 percent); even as the naira remained
stable.(-.006%)
Currency against the US Dollar (2018)
Argentina
Turkey
Brazil
India
Indonesia
Russia
Nigeria
-125% -100% -75% -50% -25% 0%
41. As a matter of fact, a recent Bloomberg data on
financial market performances shows that Nigeria
bond market remains one of the most attractive
investment destinations -In the Bloomberg's
Emerging-Market Local-Currency Government
Bonds index, which covers major emerging
markets such as Nigeria, South Africa, Argentina,
China, and Russia, in the 2nd Quarter of 2018,
Nigerian local bonds topped the chart with an
average total return of 3.2% in dollar returns(The
index covers Nigerian Government Bonds with
maturities from 2019 to 2037) . The total return is a
combination of the price changes in the bonds over
the 2nd Quarter of 2018, the interest returns and the
changes in the currency.
42. Nigeria's dominance over this period was due to
the stability of the I&E FX rate and the yields being
high by emerging-market standards. Investors are
also sure that they can exit their positions if they
want, which has been crucial in driving other
investors into the market.
Outlook and Policy Thrust for 2019
43. Global growth projections both for 2018 and 2019
have been revised downward to 3.7 percent from
the 3.9 percent earlier projected. Growth
momentum in US is projected to remain strong as
fiscal stimulus continues into 2019. In emerging
markets, growth forecasts are revised downward
for Argentina, Brazil, Iran, Turkey, and South Africa
reflecting country-specific factors, uncertainties in
the financial conditions, and rising geopolitical
tensions as well as higher oil import bills.
44. In light of the current developments in both the
global and domestic economies, and based on
extensive simulations, the CBN is of the view that
the short-term outlook of the Nigerian economy
remains good. We expect that:
• Monetary policy stance will remain judicious,
research driven, adequate and supportive of the real
economy subject to underlying fundamentals. The
current tight stance is expected to continue in the
near-term, especially in view of rising inflation
expectations and exchange market pressures.
Though we will act to appropriately adjust the policy
rate in line with unfolding conditions and outlooks,
the CBN will continue to ensure that the policy
interest rate is delicately set to balance the
objectives of price stability with output stabilization;
• GDP: With favorable oil price developments and
continued efforts at driving indigenous production in
high-impact real sector activities, especially
agriculture and manufacturing, GDP is expected to
pick-up in the remaining two quarters of 2018. This
will be buoyed by the anticipated budgetary and
electioneering spending in the near-term. From 1.5
percent in quarter two of 2018, growth is projected to
quicken to 1.7 percent in quarter three and 1.9 by the
fourth quarter;
• Inflation: Inflation expectations are rising on the
backdrop of anticipated politically-related liquidity
injections. For the rest of 2018 and towards mid-
2019 Nigeria's rate of inflation is projected to rise
slightly to about 11.4 percent and then moderate
thereafter;
•
Exchange Rate: Though the CBN has so far
managed to maintain exchange rate stability, the
current capital flow reversals from emerging markets
is expected to continue to exert considerable
pressure on market rates. This pressure could be
amplified by the forthcoming elections, especially as
the political market place heats up. Notwithstanding
these pressures, the CBN is determined to maintain
its stable exchange policy stance over the next few
months given the relatively high level of reserves.
Gross stability is projected in the FX market given
increased oil related inflows and contained import
bill. I will like to make it categorically clear that
"sustaining a stable exchange rate is of
overriding importance to us even as we continue
to put measures in place to shore up reserves";
•
BOP: Overall our balance of payments is expected
to remain positive in the short-term. Hoping that oil
prices continued to recover, we expect the Current
Account Balance to strengthen even further. This will
be supported by improved non-oil performance as
diversification efforts begin to yield results to reduce
undue imports.
• Supporting Domestic Production: Given the
remarkable success that has been achieved in
stimulating domestic production of goods such as
rice, cassava and maize, as a result of the
restrictions placed by the CBN on access to forex for
41 items, the CBN intends to vigorously ensure that
this policy remains in place, and additional efforts
would be made to block any attempts by
unscrupulous parties(both individuals and
corporates) that intend to find other avenues of
accessing forex, in order to import these items into
Nigeria. The CBN's Economic intelligence and
Banking Supervision Departments will work very
hard with the EFCC to expose and sanction any,
bank, company or Fx operator that colludes with
unscrupulous individuals / companies to undermine
the policy on 41 items. Such sanctions will include,
but not limited to prohibiting the banks from
maintaining any bank accounts for such institutions
or persons in Nigeria.
Given the global and domestic headwinds we face
as a nation, and the volatility that is being
experienced in the crude oil market, we have no
other option, as leaders interested in the progress of
our nation, but to work very hard to spur job creation
by reviving agricultural and industrial activities in the
country. If we continue to support the growth of small
holders farmers, as well as help to revive palm oil
refineries, rice mills, cassava and tomato processing
factories, you can only imagine the amount of wealth
and jobs that will be created in the country; These
could include new set of small holders farmers that
will be engaged in productive activities; new logistics
companies that will transport raw materials to
factories, and finished goods to the market; new
storage centres that will be built to store locally
produced goods; additional growth for our banks and
financial institutions as they will be able to provide
financial services to support these new businesses;
and finally, the millions of Nigerians that will be
employed in factories to support processing of
goods. If we turn a blind eye to the opportunities that
are being created as a result of our policy on 41
items, we will be spelling doom for our nation. We
can no longer afford to depend solely on imports
given the size of our population, and the need to
create jobs for our people. This is precisely the
purpose behind our intention to restrict access to
forex on 41 items, and I urge all stakeholders to
come onboard, as we intend to be vigorous in our
pursuit of this objective.
• Domestic Credit: The Bank will explore the
possibility of leveraging technology to enhance credit
to critical sectors of the economy, especially,
agriculture and manufacturing. Our recently
announc