Emefiele Projects 2.5% GDP Growth in 2020, Restates Commitment to Job Creation

Godwin Emefiele
Godwin Emefiele
  • CBN, banks create N1 billion charity fund

Obinna Chima

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele yesterday predicted a 2.5 per cent Gross Domestic Product (GDP) growth for Nigeria in the fourth quarter of 2019, up from the 2.28 per cent achieved in the third quarter. 

He also restated the commitment of the CBN to the creation of more jobs by intensifying support for the agriculture and the manufacturing sectors.

Emefiele, who spoke at the 2019 Annual Dinner of the Chartered Institute of Bankers of Nigeria’s (CIBN), held in Lagos, said, “Given the vast natural and human resources available in our country, agriculture and the manufacturing sectors offer immense opportunities as part of our efforts aimed at diversifying our earnings base and in creating job opportunities.”

In addition, Emefiele announced a new initiative by the Bankers’ Committee whereby N1 billion would be deployed under the Bankers’ Charitable Endowment Fund.

Continuing, in his projection for the coming year, Emefiele, said that the banking sector regulator intends to support greater economic growth, price and exchange rate stability by engaging in the following measures.

He said in 2020, the current tight stance was expected to continue in the near-term, especially in view of rising inflation expectations, noting that the Bank would continue to act to appropriately adjust the policy rate in line with unfolding conditions and outlooks.

“On inflation, we expect it to rise slightly to about 11.7 per cent by the end of 2019 and then moderate thereafter supported by our efforts at improving domestic production of staple food items. 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,” he said.

According to Emefiele, the CBN remains determined to maintain its stable exchange policy stance in the near to medium term given the relatively high level of reserves.

“We have provided shared agent licenses as well as payment bank licenses to three companies in 2019. Our objective is to support the development of a robust payment infrastructure that would bring more Nigerians who do not have access to financial services into the financial system. The provision of licenses to several players will help support innovation and competition as all parties work to increase their customer base.

“As part of our efforts to improve access to credit for farmers and SMES, we intend to deepen our intervention efforts through our Anchor Borrowers’ Programme, Commercial Agriculture Credit Scheme and the Real Sector Support Funds, amongst other programmes.

“This is necessary if we are to make sufficient progress in stimulating growth in our economy, particularly in the agriculture and manufacturing sectors,” he added.

The CBN governor urged Nigerians to support measures that would drive domestic productivity and diversify the country’s export base, just as he reiterated his support for the federal government’s border protection.

Emefiele stressed the need for Nigerians to look inwards by consuming goods produced locally.

“I strongly believe that it is indeed possible for us to envision a productive Nigerian economy that is not reliant on exports of crude oil. At some point in Nigeria’s history, we had an economy that supported productive activities, which created multiple streams of earnings for our nation.

“In the 60’s Nigeria’s economy was heavily reliant on agriculture, with increased cultivation and exports of primary products such as cocoa, palm oil, cotton and groundnut, etc.

“The agricultural sector in 1961 represented close to 70 per cent of Nigeria’s GDP, and generated close to 70 per cent of our export earnings.

“It was the principal source of employment, as over 85 percent of Nigerians lived in rural communities. These agricultural products also supported the food needs of our nation and provided raw materials for emerging industries,” Emefiele told his audience who were mostly bank executives and workers.

According to him, given the challenges being faced today in the oil market, Nigeria has no other choice but to return to the era when the growth of its agricultural and manufacturing sectors were used to catalyse growth and employment.

He pointed out that revenue generated from the export of such products then, helped to fund the infrastructure and human capital needs of the various regions.

Furthermore, he recalled how the export earnings from cocoa, built the Cocoa House in Ibadan; how export earnings from palm plantations supported the development of agricultural settlements in the eastern region and the Trans Amadi Industrial Layout in Port Harcourt.

In addition, he pointed out that then, the sale of groundnuts and cotton supported developments in the northern region.

“This diversified economic structure helped to improve job creation and wealth generation across the various regions.

“In the late 1950s, revenues from petroleum products were insignificant, amounting to less than two per cent of our total exports. Between 1960 and 1973 annual oil output exploded from just over 5 million barrels to over 600 million barrels.

“Improved oil production led to a high dependence on crude oil for not only government revenues but also our export earnings. Agriculture’s share of our GDP as well as our non-oil exports declined gradually as higher wages and earnings from crude oil, only served to encourage consumption of foreign goods and excessive importation of raw materials to the detriment of our local economy.

“Efforts were not made to build a stronger linkage between the agricultural and the manufacturing sector, which would have enabled local sourcing of raw materials and inputs, towards meeting the needs of the manufacturing sector.

“If these steps had been taken, Nigeria would have made significant gains in diversifying our revenue base and export earnings,” he said.

Continuing, he noted that overtime with declining investments in these critical sectors, the sale of crude oil on average, began to support close to 90 percent of our foreign exchange earnings and 70per cent of government revenue.

As a result, Nigeria became exposed to the volatility that occurs when the bulk of government revenues and export earnings are dependent on a single product, he said.

“Creating a more sustainable growth model would require that all parties work to support growth in critical sectors of our economy in order to reduce our reliance on earnings from crude oil.

 “Another important area we intend to pay close attention to as a result of these headwinds is growing our non-oil export base. 

“For a country with close to 200 million people, the emphasis on non-oil exports is due to the potential gains that could be made when human and natural resources across different areas are harnessed in creating new products and services that can be produced at scale, and sold to people in various parts of the world.

“Nations that are able to implement policy measures that support non-oil export growth are likely to make progress in generating multiple streams of foreign exchange earnings.

“More importantly, by providing a nation with multiple streams of income, greater non-oil exports can help in moderating the volatility that occurs when a nation is primarily dependent on one particular resource for most of its export earnings.”

The CBN Governor who cited an example with Chile, said the country with a population of 18 million people, exports over 2,800 distinct products, relative to Nigeria which exports close to 800 products.

In the case of Nigeria, 90 per cent of its export’s earnings are primarily dependent on a single source, crude oil, whereas Chile has a more diversified export base, with no single product supporting more than 21 per cent of its export earnings, he said.

He further noted: “In 2017, Chile was able to fetch over $88 billion from exports of its products, whereas Nigeria earned $55 billion in the same year. It is therefore no surprise that policy makers continue to emphasise that in order for our nation to grow at high single digits, supporting domestic production and expanding our non-oil export base is critical.

“I will admit that there are other constraints to the growth of the agricultural and manufacturing sectors, such as logistics and electricity challenges.

“However, I am indeed glad that the Nigerian government is working on addressing these constraints with the rollout of new rail infrastructure and the reconstruction of major road arteries such as the Lagos – Ibadan highway, the Abuja – Kano highway and the 2nd Niger Bridge. This would help in no small way in reducing the cost of transporting goods and raw materials across various parts of the country.

“Our analysis on the constraints to growth is what has influenced the policy priorities of the Central Bank of Nigeria, and the creation of our intervention programmes such as the Anchor Borrowers Programme and the Commercial Agriculture Credit Scheme.”