Driving Economic Growth with Monetary Policy and Devt Finance


The interplay between development finance and monetary policy cannot be undermined, if any economy hopes to record meaningful growth. This was the assertion of economic experts, who gathered recently at Owerri, Imo State, to x-ray the efforts of the Central Bank of Nigeria (CBN) in driving growth. Bamidele Famoofo reports

Development Finance

“Galvanising Development Finance and Monetary Policy for Growth is relevant, considering the evolving interconnectedness between development finance and monetary policy, not only in Nigeria, but in other economies across the world.’’ That was the opening remark of Deputy Governor, (Corporate Services), Central Bank of Nigeria, Edward Adamu, at a two-day seminar for Financial Correspondents and Business Editors that held recently in Owerri, Imo State, to x-ray the interplay between monetary policy and development finance to drive growth in the economy.

Adamu, who represented the Governor of the CBN, Godwin Emefiele, spoke about efforts by the Bank to stimulate economic growth through its various strategic interventions, saying, ‘’it is pertinent to note that at the Central Bank of Nigeria (CBN), our approach to stimulating economic development is three-pronged, centered on Agriculture, micro, small and medium enterprises (MSMEs) and infrastructure.”

It is perhaps common knowledge that the CBN has transcended her core mandate of maintaining monetary, price and financial system stability, to undertake developmental initiatives with a view to spurring economic growth and job creation.

Justifying the bank’s decision, he said efforts at these development finance initiatives have helped to accelerate the actualisation of the federal government’s economic diversification programme. ‘’Diversifying our economic base presents a more sustainable and stable option,’’ Adamu noted.

‘’It is our conviction that focusing our developmental efforts on sectors with inherent potential for growth, employment and accretion to foreign reserves, would enhance the fortune of the Nigerian economy,’’ he added.

Since the emergence of Emefiele as CBN governor in 2014, the Bank increased its lending to the agricultural and manufacturing sectors, through targeted intervention schemes such as the Anchor Borrowers’ Programme, Commercial Agriculture Credit Scheme and the Real Sector Support Facility. In particular, CBN sought to improve domestic supply of four commodities (rice, fish, sugar, and wheat), which consume about N1.3 trillion annually in our nation’s import bill.

The Anchor Borrowers’ Programme (ABP), which was launched in November 2015 was 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. According to Adamu, the targeted focus on the agricultural and manufacturing sectors was driven by the vast opportunities for growth in these sectors given Nigeria’s high population. ‘’The sectors have the ability to absorb the growing pool of eligible workers in our effort to meet local demand and save critical foreign reserves,’’ he argued.

Explaining the role of effective implementation of monetary policy for growth, he said, ‘’Our recent experience with recession attests to the value of effective implementation of monetary policy. Though we adopted unconventional or heterodox monetary policies, they were however, well thought through and have been yielding significant gains for the Nigerian economy. Noticeably, the GDP recovery in the third quarter of 2017, which has been sustained for nine successive quarters after five consecutive quarters of negative growth.’’

The Central Bank’s unconventional monetary policy initiatives have been premised on ensuring credit delivery to critical sectors of the economy. This has informed the directive to deposit money banks to maintain a minimum loan to deposit ratio (LDR) of 65 per cent by the end of December 2019. The bank is also creating the necessary eco-system to inculcate a better credit culture among Nigerians.

Part of the gains of the efforts of the bank is significant reductions in the nation’s annual imports bill, and increased non-oil exports. Its development finance interventions have helped to bolster agricultural production by removing obstacles faced by small holder farmers. ‘’We have also improved access to markets for farmers by facilitating greater partnership with agro-processors and industrial firms in the sourcing of raw materials. So far, the programme has supported more than 1.5million farmers across all the 36 states of Nigeria, in cultivating 16 different commodities over 1.4 million hectares of farmland. It has also supported the creation of over 2.5m jobs across the agricultural value chain.’’

For instance, it is the CBN’s game-changing intervention in the rice value chain in Kebbi and other rice-producing states across the country that increased local rice production from 2.5 million tonnes in 2015 to 5.8 million tonnes in 2017 as well as cotton intervention with the flag-off of input distribution to 150,000 cotton farmers, cultivating 150,000 hectares in 23 States of the Federation.

The CBN, not resting on its oars, said it is currently paying additional attention to cassava because the commodity has many different uses along the value chain. It claimed the value chain has enormous potential for employing over 2 million people in Nigeria

The Director, Monetary Policy Department, Central Bank of Nigeria, Dr. Moses Tule, said the Act established the CBN also empowers the bank to engage in developmental functions to ensure economic stability.

He said some of the outcomes of the combined match of monetary and development finance policies of the CBN in Nigeria was the 2.28 per cent GDP growth recorded in Q3 2019.

He noted that improvement in the “doing business indicators” came as a result of the introduction of the transparent I&E FX Window, which boosted investor’s confidence and eased market sentiments also buoyed our doing business indicator.

“Restriction on certain items led to spectacular improvements in domestic production of most of these items. Local manufacturers are reporting major boosts to their revenue and profit due to the policy,’’ he said.

Other Comments

Renowned Economist, Prof. Ken Ife, said that but for the bold interventions of the CBN in the economy, it would have collapsed. His words: ‘’Recession could have gone as bad as -9percent by now.’’ Ife argued that the commodities, which the CBN removed from its FX funding list, was good as they don’t contribute anything meaningful to GDP growth. Rather, he said, the action taken to proscribe the funding of the importation of those 41 goods item with scarce FX, had helped to boost local production.

Labour leader, Mr. Isa Aremu, said the Central Bank for the first time, under the supervision of Emefiele, made sincere move to revive the comatose textile industry through creation of value chain from cotton farmers to production (industry). He revealed that the bank has signed a Memorandum of Understanding (MoU) with labour for Nigerians to patronise locally made textile materials. He said many of the textile companies closed down will be revived if the agreement is fully implemented. Aremu hinted that reviving the textile industry as planned by the CBN will boost the nation’s economy by about $3.4billion annually.

Commissioner for Finance, Imo State, Prof. Uche Uwaleke, who chaired a technical session at the seminar, said the CBN had proven that it was the most proactive institution that is driving growth in Nigeria. He stated that the 2.28 percent growth in GDP achieved by the country in third quarter of 2019 was directly attributable to the development finance interventions and monetary policy prowess of the CBN.


The modest achievements of the Central Bank in driving economic growth through effective monetary policy implementation and development finance notwithstanding, there are hurdles to cross for realise expected growth. One of them, according Tule, is overcoming the challenge of poor coordination between the fiscal and monetary authorities as successful implementation of monetary policy is highly vulnerable to setbacks.

He argued that the coordination between monetary and fiscal policy can no longer be ignored if the economy is to function at its optimal capacity.