FINANCE
Although, the Governor of the Central of Nigeria, Mr. Godwin Emefiele, opted for a low-key 60th birthday celebration last week, his achievements, especially in his capacity as the CBN helmsman cannot be kept under the carpet. Festus Akanbi examines Emefiele’s robust performance in his seven years’ stint at the apex bank
Until his emergence as Governor of the Central Bank of Nigeria on March 6, 2014, Mr. Godwin Emefiele, who turned 60 years old last week remained a conservative man, running an equally conservative but hugely successful Zenith Bank Plc.
His appearance in the media space was measured, so also his positions on issues. However, the former Managing Director and chief executive of Zenith Bank never left anyone in doubt about his competence, nationalist fervour, and professionalism.
This was why upon his appointment as the new apex bank’s helmsman, the first step he took was to embark on a wide-ranged consultation with his fellow bank’s chief executives, the academic community, which he still has a close affinity with, the organised private sector, and of course, the media.
His resolve was to make a remarkable difference in the office laced with banana peels because of the tendency of Aso Rock to interfering in the activities of the Central Bank from time to time.
So, when sometimes in March, he invited this correspondent to his Ajose Adeogun’s office, his question was what do you think can be done differently?
The discussions ranged from giving the apex bank a human face to ensuring that everyone was carried along. He also gave the assurance that his office would be opened to suggestions as feedbacks.
However, seven years down the line, Emefiele can be said to have left an indelible mark on the nation’s financial sector as several policy decisions initiated and implemented by the apex bank under his watch have proved to be the needed economic balm, especially in the period of crises, which has seen Nigeria in and out of economic recession twice.
It was therefore not a surprise that on June 2, 2019, President Mohammadu Buhari renewed the appointment of Mr. Emefiele, an appointment seen as a cautious choice for a role that will be critical in the period leading to the post-Covid-19 era.
The Winners: The Banking Industry
Having run one of the most profitable banks in the country before he was headhunted by President Goodluck Jonathan’s administration, the CBN Governor has been able to demonstrate his firm hold on the banking industry in the past seven years.
Industry watchers attributed Emefiele’s close monitoring to the current stable outlook in the industry. It is instructive that under his watch, the industry was devoid of crisis in the scale that existed before his tenure and this is why so far, apart from the board and management of Skye Bank Plc, which were sacked, no other commercial banks had any cause to lose its officials on the order of the apex bank.
The recent clampdown on bureau de change operators, which gave their share of official foreign exchange allocations to banks is another gain for commercial banks.
What this singular policy change will do for banks is to increase customers’ traffic. This will in turn trigger more profit-yielding transactions in the banks.
Newly Licensed Banks
In June 2019, the CBN, under the leadership of Emefiele, licensed three new banks, which included two commercial banks and one non-interest bank, to boost banking operations in Nigeria. The new entrants are Titan Trust Bank Limited; Globus Bank Limited and TAJ Bank Limited, which is a non-interest bank.
This development has brought the number of commercial banks to 22 and two non-interest banks, namely: Jaiz Bank Plc and Taj Bank.
The 22 commercial banks are Access Bank Plc, Citibank Nigeria Limited; Ecobank Nigeria Plc; Fidelity Bank Plc; First Bank Nigeria Limited; First City Monument Bank Plc; Globus Bank Limited; Guaranty Trust Bank Plc; Heritage Banking Company Limited; Keystone Bank; Polaris Bank; Providus Bank and Stanbic IBTC Bank Limited; Sterling Bank Plc; Sun Trust Bank Nigeria Limited; Titan Trust Bank Ltd; Union Bank of Nigeria Plc; United Bank for Africa Plc; Unity Bank Plc; Wema Bank Plc and Zenith Bank Plc.
Professionalism in Banking Industry
Observers believe that by staying out of political drama, Emefiele has been able to set a good example for bank chiefs and the result is a banking industry devoid of scandals.
The industry is also free from the activities of politically exposed persons.
Indeed, Emefiele has been able to prove himself to be a thoroughbred banker and economist who does not leave official responsibilities to chase shadows, hence the decision of President Buhari to put him forward again after the expiration of his first term, a feat unrivalled since the return of democracy in 1999.
Microfinance Banks
Under the supervision of Emefiele, the CBN has continued to revise supervisory and regulatory guidelines for the operations of microfinance banks in the country, a development said to have contributed to the stability in that sector.
The bank also introduced new capital for operators. According to the latest directive from CBN, the Tier 1 microfinance banks had their capital threshold raised from N100 million to N200million by April 2021, while the threshold for the Tier 2 unit moved from N35million in 2020 to N50 million as of April this year.
For the state-based Microfinance Banks, the CBN moved their capital from N500 million in April 2020 to N1billion by April 2021.
According to the CBN, the changes were made to improve the performance of the Microfinance Bank in the financial industry.
The Productive Sector
Emefiele’s adopted a protectionist policy in favour of locally produced goods and services.
His policy was designed to drastically reduce imports and encourage local production and create jobs. At the heart of the policy was the desire to spur the domestic economy, which had been swallowed with an unrestrained taste for foreign goods and enhance production.
Realising the undue pressure over the nation’s external reserves, especially from importers of all manner of goods and services, Emefiele decided to cut off importers of 41 items from official foreign exchange allocation, with the promise to expand the list from time to time.
This policy also seeks to discourage the dumping of sub-standard goods which were flooding the Nigerian markets. To ensure that a vacuum was not created and to ensure that dealers in the goods barred from CBN fx allocation have other profitable things to do, the CBN came up with the Anchor Borrowers’ Programme, Investors and Exporters Window, Youth Entrepreneur Development Programme (YEPD), Real Sector Support Fund Facility (RSSP) and Accelerated Agriculture Development Scheme (AADS) (this not to mention the N220bn MSMEDF, ACGS, SMECGS, etc.) and importantly, his brand of economic nationalism – Produce, Add Value and Export (PAVE).
Gradually, many Nigerians began to appreciate the importance of the CBN’s action on the 41 banned items. Many entrepreneurs took advantage of this policy to venture into domestic production of the restricted items with remarkable successes and a great positive impact on employment. The dramatic decline in import bills and the increase in domestic production of these items attested to the efficacy of Emefiele’s initiatives.
The CBN Governor himself attested to these developments. According to the statistics reeled out by the CBN, the Bank’s monthly food import bill from $665.4 million in January 2015 fell to $160.4 million as of October 2018; a cumulative fall of 75.9 percent and an implied savings of over $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% in sugar, and 68.5% in wheat.
Also, the Investors and Exporters FX (I&E) window was introduced by Emefiele, which allowed investors and exporters to purchase and sell foreign exchange at the prevailing market rate.
The Investors and Exporters’ Forex Window attracted over $50 billion investments into the country within a spate of three years.
The Governor is said to have been able to rally commercial banks’ chief executives to support his vision in growing the economy by setting aside five percent of their annual profit to finance agriculture and the real sector to create jobs and wealth.
Talking about his drive to rally around local producers of goods and services, Emefiele was quoted as saying, “This path of supporting domestication of local production in Nigeria is imperative for us to enable growth that is inclusive and sustainable.
“We can’t afford to continue to rely on a model that encourages imports of goods and exports of jobs away from Nigeria, as the ramifications will be huge on our economy”.
To confirm that the CBN under his watch is on the tracks, Emefiele stated, “Our efforts have aided the recovery of the manufacturing sector as reflected in the Purchasing Managers Index which shows that the index on manufacturing activities rose from a low of 42.4 points in May 2020 to 48.7 points in February 2021.
“While growth remains fragile, driving further growth of the economy would require that we continue to support more investments that will enable the growth of the manufacturing sector in Nigeria,” the apex bank governor said.
Nigerian Farmers
One can describe the tenure of Emefiele as a season of support to Nigerian farmers.
As a result of the various support for rice farmers, rice pyramids have mounted in Kebbi State, as rice is now being produced in about 26 states in the federation, making Nigeria almost self-sufficient in rice production. So also, is the bumper harvest that has been recorded in sorghum, maize, millet, cassava, tomatoes, and cotton farmers under the CBN’s Anchor Borrowers’ Programme.
In line with its developmental function, which is distinct from its primary mandate of price stability, the CBN had established the Anchor Borrowers’ Programme (ABP) which was launched by President Muhammadu Buhari in 2015.
The programme aimed to create a linkage between anchor companies involved in the processing and smallholder farmers (SHF) of the required key agricultural commodities.
The thrust of the ABP is the provision of farm inputs in kind and cash to smallholder farmers to boost production of farm commodities which states have a comparative advantage to produce including cereals namely rice, maize, wheat, cotton; roots and tubers namely cassava, potatoes, yam, ginger, tomato, poultry, oil palm, fish, sugarcane among others.
The CBN governor’s efforts towards food sufficiency especially in rice production have now materialised and currently causing ripples effects in the economy.
Today, there has been a revolution in local rice production, as most of the inactive rice mills across the country have suddenly received life again while the staple has become the favourite in most Nigerian homes, partly because of its affordability and the fact that local rice had been properly cleaned up to eliminate stone particles which had been a turn off for most people.
The staple can now compete with the imported counterpart.
The National President, Rice Farmers Association (RIFAN), Alhaji Aminu Goronyo said all farmers’ groups have lauded the pronouncement and committed to ensuring the country achieves food security.
He said: “It is not a new thing at all as the Central Bank of Nigeria (CBN) has in the last four years, has not been issuing forex to most of the essential commodities that were being imported into the country.
“For over four years, rice and other commodities including maize had not enjoyed any support from the CBN to import them into the country. So, this is not a new thing, nevertheless, it is a welcome idea as Nigeria in no distant time will be self-sufficient in all commodities going by this instruction from the president.”
The Creative Industry
Realising the rising potentials of the creative industry, Emefiele recently unveiled the plan to commence the implementation of the N22 billion Creative industry development scheme.
The Creative Industry Initiative, he said was aimed at unlocking the creative talents of Nigerian youths and was designed to generate 800,000 jobs in the movie, music, and fashion sectors, and increase the revenue of the industry by $300 million.
The CBN governor stated that throughout the initiative, over five years, 50 additional cinemas would be developed across the country. This, he said would increase the contribution of the movie industry to the nation’s Gross Domestic Product (GDP) to 3% from the current level of 1%.
The plan is said to create over 200,000 direct and indirect jobs in the country. Just like the movie industry, the music industry would also be expanding through this initiative, as over the next five years, young Nigerians would be able to capture a significant market share of the $10.7 billion music industry. It would also create over 500,000 direct and indirect jobs.
For instance, the ongoing remodelling of the National Arts Theatre under the ‘Lagos Creative and Entertainment Centre’ is one such supports. The N21.3 billion remodelling project initiated by the CBN-led Bankers’ Committee will house the fashion, music, movies, and IT hubs. It will boost the creative and IT sectors in the areas of job creation, capacity building, and forex revenue generation.
The CIFI goal is to support start-ups and existing businesses across these four pillars as well as foster the development of a Nigeria Creative Industries Centre in major cities in Nigeria.
The CBN has, through the CIFI scheme, encouraged banks to play more prominent roles by ensuring that the creative industry not only gets funding but also the right capacity that promotes creativity.
Losers: Board and Management of Skye Bank Plc
On July 4, 2016, the CBN announced the sack of Skye Bank’s management team and board, when Emefiele blamed their dismissal on Skye Bank’s inability to meet requirements for capital adequacy ratio (CAR) – a measure of how much capital banks have to protect customers’ deposits.
A bridge bank option was adopted. Today, Skye Bank is now significantly less popular but stable Polaris Bank.
Board of FBN Holdings
In the case of First Bank, the banking arm of FBN Holding Plc, analysts described Emefiele’s recent intervention as an attempt to stem the tide of high-handedness, which could have precipitated an unmitigated crisis in the oldest bank.
Proving to be a gentleman who knows when to ‘bark and bite,’ Emefiele stepped into the bank’s crisis when he overruled the decision of the board of the bank to sack the current chief executive, Dr. Sola Adeduntan, without recourse to the apex bank.
Emefiele did not mince words. First Bank’s leaders crossed the line and were made to pay, without hurting the bank’s minority shareholders and 31 million customers. Too big to fail does not mean too big to be flogged.
Bureau de change operators
Perhaps, members of the Association of Bureau de Change Operators of Nigeria (ABCON) should be counting their losses by now having been eliminated from the chain of money market operators with access to official foreign exchange supply.
The CBN Governor who wielded the hammer two weeks ago blamed some bureau de change operators for unwholesome activities, which allegedly heightened pressure on the available dollar supply with a corresponding crash in the value of the naira. Today, Nigerians who need foreign currencies for their Basic Travel Allowance can access any commercial banks for such transactions, leaving the BDC operators to deal with few customers who approach BDCs to avoid bank’s protocols. The policy shift also left BDC operators to look for their fx supply from other sources, with the attendant stress and low-profit margins.
Parallel market operators
Analysts believe that Emefiele’s pronouncements on BDC operators were bound to affect the operations of parallel marketers of forex. Given the suspicion that some of the BDC operators are the brains behind the boom in the parallel market, the restriction from the official fx market on BDC operators will not only reduce the volume of trade in the black market, it will also force some sponsors of black market activities to go underground.
Emefiele had announced the readiness of the apex bank to investigate the activities of some fx operators involved in arbitrage activities.
Some Microfinance banks
To ensure strict compliance with the laid down rules, the CBN under Emefiele was compelled to withdraw the licences of some microfinance banks for sundry infractions.
The list of licensed microfinance banks as of August 19, 2015, was 949 but as of June 30 this year, the list had reduced to 876.
Smugglers and importers of 41 items excluded from CBN List
It didn’t come as a surprise that a cocktail of reforms introduced into the foreign exchange market is frustrating the activities of smugglers, especially, those bringing in food items into Nigeria.
The revolution in rice farming, for instance, is creating an unprecedented appetite for locally produced rice, which is found in the local markets in greater quantity, a development that signposts the gradual rejection of smuggled foreign rice in Nigeria.
Also, the noose tightened on BDC operators is said to be frustrating smugglers and importers of less important items into the country because, under Emefiele, doors of cheap fx have been shut since he insisted the few available foreign exchanges should be reserved for ventures. which guarantees employment opportunities and wealth to Nigerians.
Given the laudable achievements of the CBN under the leadership of Mr. Emefiele, one can say that the apex bank is on the right track, especially with its timely interventions in critical sectors of the economy.
As Head, Retail Investment, Chapel Hill Denham, Mr. Ayodeji Ebo puts it, “The CBN Governor came into position at a very crucial time where the economy has experienced economic recession at two different times.
“As stated in his inaugural address, the CBN Governor has provided significant support for the Nigerian economy through the use of intervention funds to boost economic growth.”
