Godwin Emefiele’s Midas Touch in Agriculture

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Godwin Emefiele
CBN Governor, Mr. Godwin Emefiele

Sani Tureta

No Governor in the history of the Central Bank of Nigeria (CBN) has strongly impacted on the country’s agriculture sector as seen in the almost five-year leadership of Godwin Emefiele. He has creatively implemented strategy to diversify the productive base of Nigeria’s economy, thus, creating thousands of jobs in agriculture and conserving foreign exchange. This CBN governor has gone all out to help regain the lost glory of Nigeria in agriculture, meet the local demand and stop the exportation of jobs to other countries at the detriment of our local farmers and industries.

Aside from conserving foreign exchange, the introduction of the policy that excluded 43 items from being procured with foreign exchange from the Nigerian forex markets by Emefiele, was largely aimed at improving domestic agriculture production.

Recall that in March, Emefiele met with stakeholders in the cotton, textile and garment sector where he announced some policy measures to revive the sub-sector, including the reinforcement of the ban on the use of forex from official sources to finance import of textiles. By 2020, the CBN governor expects textile manufacturers to have backward integration arrangements to produce cotton to feed their facilities. He also promised to fast-track the financing of 100,000 cotton farmers in 2019 farming season to meet the needs of Nigerian ginneries while efforts are being made to ensure that cotton seeds are produced locally to meet domestic demand for planting purposes.

In order to fully revive textile industries across the nation, the CBN also decided to provide financial support to textile manufacturers at single digit rate, to refit, retool and upgrade their factories in order to produce high quality textile materials for the local and export market. In addition, the CBN has restricted access to FX for all forms of textile. This CBN governor has laid the foundation expected to plug the loss of over $2 billion on textile importation annually.

His engagements with Oil Palm Value Chain Stakeholders (Plantation Owners, Refiners, Research Institutes and Associations) have also been yielding fruits. Emefiele has helped to catalyze and fast-track investments across the oil palm value chain. Oil palm is on the forex excluded list. Now, official figures indicate that importation of oil palm had declined by about 40 per cent from the peak of 506,000 MTs in 2014 to 302,000 MT in 2017. This CBN governor has clearly changed the narrative.

Last March, the CBN governor met with Oil Palm Value Chain Stakeholders, where he rolled out further steps and set a partnership model that would, with immediate effect, stimulate investments in the palm oil plantations such that within the next five years, the global share of the Nigeria’s oil palm production would increase. “Our ultimate vision is to overtake Thailand and Columbia to become the 3rd largest producer in the next 10 years,” Emefiele said at the meeting.

The CBN governor also told the Oil Palm Value Chain Stakeholders that, “on the finance supply side, the Bankers’ Committee had established a special sub-committee to make recommendations on sustainable financing models for oil palm and four other critical agricultural commodities that include cocoa, sesame seed, shea-butter and cashew.

His engagements with state governors on how to increase oil palm production are also yielding fruits. Emefiele said: “I am happy to announce that all the states in the South-South and South-East regions have agreed to provide at least 100,000 hectares for the oil palm initiative. This programme also accommodates the small holder oil palm farmers. For the country to attain self-sufficiency, there has to be committed development of more estate plantations and coordinated partnerships between the small holder plantation farmers and processors.

The oil palm industry is a US$60 billion market and Emefiele believes Nigeria desperately needs to be a major player. That was why he promised that the CBN would work with stakeholders to ensure availability of quality seeds and agro-chemicals, ensure land clearing services at affordable cost, and above all, guaranteed prices and markets for all products in the value chain.

The Government’s Anchor Borrower Programme (ABP) has ensured that Nigeria emerged from being a net importer of rice to becoming a major producer of rice. The significant reduction in imports of rice from Thailand represents a saving of over US$600 million to Nigeria in 2016 alone. It is heart-warming to note that this fall in imports have been largely filled by a boost in local rice production. As at October 2018, thousands of 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.

No doubt, these measures by Emefiele have started bearing fruit with enquiries by various stakeholders and serious investors about doing agriculture business in Nigeria.

The CBN, under Emefiele’s leadership, was able to increase lending to the agriculture sector, through targeted intervention schemes such as the Micro Small and Medium Enterprise Development Fund (MSMEDF), Anchor Borrowers Programme, Commercial Agricultural Credit Scheme and the Real Sector Support Facility.  In particular, he worked on improving domestic supply of four commodities (rice, fish, sugar and wheat), that consume about N1.3 trillion annually in Nigeria’s import bill.

Furthermore, to spur banks’ lending to high-impact sector, including agriculture, the CBN, at its July 2018 MPC, pledged to refund CRR to banks that bring proposal for funding of new projects or expansion of existing ones in agriculture and manufacturing sectors. Accordingly, they will qualify for CRR refund of up to 100 per cent. Banks are using this opportunity to expand credits to the agriculture and manufacturing sectors.

The recovery of the Nigerian economy has been driven largely by improved non-oil activities, especially the agriculture sector which expanded consistently by about 3.5–4.3 percent, reflecting Emefiele’s efforts at helping to diversify the economy. The   gradual re-orientation of the economic structure towards the agriculture sector is a reflection of the diversification drive and the development finance initiatives of the CBN under Emefiele.

Activities in the manufacturing sector also witnessed significant improvement between August 2016 and February 2019, thanks to improvement in local production of agricultural raw materials. The Primary Manufacturing Index rose for 23 consecutive months, from a low of 42 points in August 2016 to 57 points in February 2019. This development was attributed to sustained supply of foreign exchange and stability of the Naira. Due to the dogged implementation of Forex restriction on certain items, Nigeria recorded spectacular improvements in domestic production of agricultural raw materials. Local manufacturers across the country are reporting major boosts to their revenue and profit due to the policy.

The efforts by the CBN over the past three years, to retool the country’s economy have been focused on limiting the reemergence of the vulnerabilities that precipitated and exacerbated the 2015–2017 economic crisis. These vulnerabilities were an overwhelming dependence on oil revenues for the country’s foreign exchange and a high level of imports. Emefiele has been building on efforts at driving domestic productivity and increasing exports of processed goods from Nigeria. This is paramount, in order to limit the impact of oil prices on the Nigerian economy.

With the CBN continued efforts at driving indigenous production in high-impact real sector activities, especially agriculture and manufacturing, Nigeria’s GDP has consistently been on the rise for almost three years.

The Emefiele agriculture revolution has no doubt contributed to the reasonable measure of economic success achieved in the last four years, such as exiting recession, gradually growing the GDP, moderating the level of inflation, stable exchange rates and maintaining a comfortable level of external reserves.

Emefiele’s CBN has been aggressively deepening its foray into development banking, by ensuring that adequate support, through several means, is directed to support producers of products such as rice, fish, tomato, wheat, textiles, palm oil and the range of items on the list of 43 items excluded from Forex in the Nigerian forex market.

As at March 15, 2019, in order to improve local rice production, the CBN committed a total of N171.35 billion in the Anchor Borrowers’ Programme with active participation across the 36 states of the Federation and FCT. Thousands of farmers have benefited from the Anchor Borrowers Programme, cultivating about 960,643 hectares of land across the states and FCT. Given the success achieved under this programme the CBN has promised to continue to support it until the full potential of the sector is achieved.

The CBN intervention in production of tomatoes currently stands at a little over N10 billion in eight projects. One of the projects is the Dangote Green House tomato manufacturing project, which has the capacity to produce 10 million tomato seedlings in a month. This would be sold to about 5,000 outgrowers that would grow and supply the tomato factory, which has commenced operations, with tomato fruits. The project has the capacity of generating one million jobs from supporting small holder farmers in tomato cultivation to paste. This project has the capacity to save the Nigerian economy over US$250 million annually.

This renewed focus by the CBN to support improved growth in the agriculture and manufacturing Sectors in Nigeria, is clearly in line with the federal government’s determination to diversify the base of Nigeria’s economy away from a reliance on crude oil, so as to insulate our economy from the vagaries and shocks associated with volatility in crude oil prices.

No doubt, this CBN governor has done more than enough for Nigeria’s economy in five years. Many will not forget in a hurry how he oversaw Nigeria’s widely-acclaimed response to the plummeting of crude oil prices, a spiraling inflation, significant exchange rate pressures, sharp fall in Forex inflows, delisting of Nigeria from the JP Morgan Bond Index, normalisation of US monetary policy, geopolitical tensions amongst global superpowers, and overall uncertainty following the historic change of Nigeria’s Federal Government in 2015.

In particular, the Bank’s policies helped Nigeria achieve the following fast-paced recovery from recession, which was caused by sharp and sustained oil price declines from 2015 through 2017. This is a milestone. In contrast, Nigeria’s peers are still struggling. South Africa is basically still in recession while Egypt had to resort to a US$12 billion IMF loan.

Emefiele successfully managed the longest month by month decline in inflation from about 19 per cent in January 2017 to about 11 percent in July 2018. He helped to avert a major crisis with labour groups by innovatively assisting the new administration of President Muhammadu Buhari offset billions of arrears in salaries, pensions and gratuities. He led the drive for a sharp drop in Nigeria’s import bill, thereby restoring the country’s current account to a surplus.

His deft economic policies boosted the value of the Naira, which had depreciated to about N520/US$1 as at January 2016. Today, the Governor’s policies restored it to about N360/US$1. Indeed, using uncommon vigilance and deep knowledge of the markets, the rate stayed same throughout Nigeria’s general elections, a first for the country.

He created the Investor-Exporters FX Window, which triggered an inflow of over US$25 billion into the country. There is also the massive accretion in the country’s Foreign Exchange Reserves, from about US$23 billion in October 2016 to nearly US$48 billion in June 2018.  

Under Emefiele, there was massive expansion of banking services with financial inclusion rate reaching nearly 64 per cent in 2018, up from only 32 per cent in 2012. He also facilitated major improvements in Nigeria’s ranking on the World Bank’s Doing Business Indicators through the creation of the Collateral Registry and Credit Reference Bureaus. This man clearly deserves another five years as CBN governor.