Emefiele: CBN Pumped N2trn into Economy in 15 Months to Boost Growth

RateNigeria's Central Bank Governor Godwin Emefiele
  • CBN Pumped N2trn into Economy in 15 Months to Boost Growth

As part of efforts to reflate Nigeria’s ailing economy, the Central Bank of Nigeria (CBN) disbursed nearly N2 trillion to both public and strategic private sectors of the economy in the last one year.

The CBN Governor, Mr. Godwin Emefiele, who spoke in an exclusive interview with thisday yesterday, said in order to stimulate expenditure in most states that could not pay salaries, the central bank around July 2015, came up with the idea of a Workers’ Salary Assistance Programme.

Under that scheme, the Central Bank disbursed a total of about N405 billion to all the affected states, the central bank governor disclosed.

The CBN also disbursed N10 billion to almost all of the 36 states respectively, to fund their infrastructural projects. Under this scheme as well, the CBN did intervention to the tune of N350 billion.

Throwing more light on the apex bank’s disbursements in the last one, Emefiele said: “The total of both intervention is close to N800 billion, that was injected to support the sub-national governments either for them to pay salaries, or for them to support their infrastructural development in their states. These are some of the actions that were done.

“Aside from that, the CBN also disburses money through the Commercial Agricultural Credit Scheme (CACS), the Power and Aviation Intervention Fund (PAIF), and the refinancing facilities. Under each of the scheme, as I speak to you, the Central Bank has outstanding of nothing less than N1 trillion that had been disbursed by way of intervention in line with our development finance objectives to support the real sector as well as the entire economy. So, those are some of the things we have done. But I can assure you that we would continue to do so,” Emefiele said.

Throwing more light on the central bank’s disbursements in the last one, Emefiele said: “The total of both interventions is close to N800 billion. It was injected to support the sub-national governments either for them to pay salaries, or for them to support their infrastructural development in their states. These are some of the actions that were done.

“Aside from that, the CBN also disburses money through the Commercial Agricultural Credit Scheme (CACS), the Power and Aviation Intervention Fund (PAIF), and the refinancing facilities. Under each of the scheme, as I speak to you, the Central Bank has outstanding of nothing less than N1 trillion that has been disbursed by way of intervention in line with our development finance objectives to support the real sector as well as the entire economy. But I can assure you that we would continue to do so.”

According to him, the reduction of the cash reserve requirements (CRR) from 30.5 per cent to 25 per cent in July last year, was expected to inject about N1 billion into the economy, through the banking sector.

However, he said instead of lending the money to the real sector, “most of that money may have been eventually round-tripped into the foreign exchange market and it put a lot of pressure on the forex reserves.

“When we (Monetary Policy Committee) met again in September, because we didn’t see the injection of liquidity to support the real sector of the economy, we decided that we were going to reduce the CRR again from 25 per cent to 20 per cent.

“But we said that through the reduction in CRR that banks should identify specific projects in agriculture, manufacturing, etc, that we would release whatever amount they needed to support this.

“Unfortunately, what we found was that instead of the banks sending us projects that were meant for the real sector and for agriculture, what they did was that they sent us projects meant to finance hotels, projects meant to finance hospitals, and others that we didn’t consider to be real sector projects.

“Those of them that brought projects in the manufacturing sector just brought projects that they were refinancing in their balance sheets and we felt that was not right. But you will find that in due course, and I mean in the next couple of weeks, some disbursements would be made to core agriculture projects.

“That is those who are financing large scale production of rice, tomatoes, diary, wheat and maize. These financing would represent our own attempt to ensure that we grant loans to companies that are serious about agriculture and core manufacturing. So, these were direct attempts that we used through the banks,” he explained.

Emefiele said the aviation sector is an important sector in the economy, just as he assured that the central bank would continue to fund the foreign exchange need of operators in the sector.

However, the CBN governor faulted the insinuation foreign airlines were moving out of the country due to FX scarcity.

“It is important for me to correct the impression that airlines are closing down or airlines are moving out of the country because of inadequate access to foreign exchange. No one can deny that everyone is finding it hard to get FX these days, given the sharp drop in oil prices and FX inflows. So that may be part of the issue.

“But the real reason airlines are reducing their flights is a lack of passengers not just in Nigeria but all around the world. As a result of the global economic situation that we find ourselves today, there has been a serious reduction in the number of travelers in different parts of the world. The aviation sector in different parts of the world is confronted by this.

“I would imagine that rather than travel in a weekend to go and organise a party or go and conduct wedding in Dubai or travel to go and organise party in London, given the situation we find ourselves, people have now learnt that there is a need for them to be prudent in spending money.

“So, no doubt, we have seen a reduction in the number of travelers. And because there is a reduction in the number of travelers, naturally there is a reduction in the occupancy rate for the airlines.

“So, that is what has happened. Now, are we giving them forex? You will recall that last week when we did some secondary market intervention through forward, we also considered the aviation sector and we gave them what they needed. We are meeting their foreign exchange needs. So, when people say they don’t have foreign exchange, I don’t really understand what they are talking about because we have taken the aviation as an important sector in the country.

“I have heard people speculate that the airlines are relocating to Ghana. Are they suggesting that Ghana has more FX than us? They are facing the same FX shortages like us, if not worse. And by the way, Ghana’s FX reserves are probably less than 25 percent of ours here in Nigeria. So, it cannot be correct that the airlines are relocating there,” Emefiele explained.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years experience as a foreign exchange research analyst and trader.

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