Emefiele: CBN’s Monetary Policy Yielding Results for Economy

Godwin Emefiele
CBN Governor, Mr. Godwin Emefiele
  • We’ve been able to reduce inflation, build FX reserves, foster real growth

James Emejo in Abuja 

Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele has again hit back at critics questioning its resort to unconventional monetary policy tools in trying to proffer solutions to the challenges facing the Nigerian economy, insisting that the use of unorthodox methods had yielded greater results in getting the economy out of the woods.

Speaking yesterday at the maiden convocation lecture of the Edo University Iyamho, the CBN governor explained that the apex bank intended to leverage unconventional monetary policy instruments in improving local production of commodities, as growth in the country’s agriculture and manufacturing sectors remained critical in government’s efforts to create a diversified wealth base for the country. 

He said this would also help to insulate the economy against volatility associated with changes in crude oil prices.

Expanding further on the criticism over the use of unconventional means to reset the economy, particularly from the World Bank, Emefiele said: “When we began to utilise these tools, they were initially criticised by adherents of conventional monetary policy tools. 

“Critics asserted that our FX policies constitute exchange restrictions, rationing of FX, discretionary allocation based on priority categories, and a multiple currency practice.

“While there is sufficient evidence of significant reductions in our annual import bill, and increased non-oil exports, these critics assert that we are restricting trade and creating unfair competition.

“To our critics, conventional monetary policy requires that to encourage domestic production, we should impose higher tariffs and levies.  However, our experience in Nigeria has shown that, these tools have never worked, given the various attempts by certain economic agents to undermine the success of these policies.”

Emefiele, who delivered the convocation lecture titled, “The Role of Monetary Policy Towards Economic Growth in Nigeria”, maintained that the favourable outcomes and strengthening outlook of the Nigerian economy was traceable to the timeous adoption on unconventional monetary policy tools.

He told a captive audience that the CBN had been able to reduce inflation, build FX reserves, maintain FX market stability, and foster real growth through the use of unorthodox policies.

However, he admitted that there are still challenges. 

According to him, “The pace of population growth at about 2.6 per cent still outstrips real growth rate while inflation is outside our tolerance band.

“Unemployment rate and incidence of poverty remain at unacceptable levels. Our economy still faces headwinds from expected declines in global growth and its resulting impact on oil prices and capital flows to emerging market countries.”

Emefiele said these challenges required that the government strengthen its efforts at enhancing growth in productive sectors of the economy, which will help in insulating the economy from external shocks.

He further added: “Nevertheless, I am happy to note that much of the success we see today is due to the adoption of unconventional macroeconomic policies. Within the CBN, our unconventional methods (especially in the management of the FX market and our development financing) supported by the orthodox approaches (in the form of our timely adjustments of monetary policy rate) have been able to optimally balance the delicate objectives of price stability and real output growth.”

He said the apex bank would continue to devise ways of ensuring that an optimal mix of monetary policy is continually deployed to engender the overall wellbeing and prosperity of the Nigerian economy. 

He added that the overall aim of the CBN remained the concurrent attainment of price stability, real growth, full employment, and poverty reduction.

Emefiele, further called on Nigerians to embrace agriculture as a more sustainable means of job creation as this would further stimulate the economy from external shocks.

He said the country must stand resolute in protecting its borders from smugglers and dumping, adding that the closure of its borders will not only act as an incentive to boost production in the agricultural sector, but also help its neighbours to adopt measures to better run their economy and create jobs.

Arguing that though the country cannot afford to leave the borders perpetually closed, he said keeping it shut for a period of two years could drastically reduce the rate of insurgency, kidnappings and internet fraud as they would find agriculture more attractive.

The CBN governor noted that Edo State, for instance, could generate over 200,000 jobs and millions of dollars in foreign exchange from supporting cultivation and processing of palm oil.

He said: “During the peak of the oil crisis, Nigeria earned close to $23 billion from exports of crude oil in 2017, relative to Indonesia, which earned close to US$22 billion from the export of palm oil during the same period. 

“I am indeed delighted that following our intervention with palm oil producers, over the next few years, annual production of palm oil in Edo State alone would be in the realm of 350,000MT. Nigeria has vast amounts of arable land that can be put to good use in the cultivation of not only palm oil but also cotton, cocoa, tomatoes and rice to mention a few.”

Nonetheless, he said the Anchor Borrowers Programme (ABP), launched in November 2015, had been designed to build partnerships between small holder farmers and reliable large-scale agro-processors, with a view to increasing agricultural output, while improving access to credit for farmers.