Emefiele and CBN: Beyond monetary policies

As Godwin Emefiele begins his record second tenure as chief executive of Central Bank of Nigeria, it may be necessary to look beyond the haze and see how the apex bank under his watch has deliberately and decisively stepped beyond the bank’s traditional monetary policy role by pursuing and implementing fiscal policies for the overall interest of the economy. The thinking it would seem is that monetary policies cannot be operated and implemented in isolation of other factors of economic growth. It is no news that government is a major player in the Nigerian economy. Its policies therefore must be in tandem with the required and desired trajectories for growth.

Often political expediencies make it impossible or difficult for some governments to take correct and proper fiscal decisions. The reason is that although a policy may be sensible economically, in terms of political survival it could be disastrous for the overall image of the government. No government wants to bite the dust because of a tough but necessary policy. As a result, the need for operators of the Central Bank and the government to see the fine details and have a broader outlook of the economy cannot be overemphasized. Some of these thoughts had gone into policy formulation and implementation during Emefiele’s first term. This may be one of the reasons President Muhammadu Buhari decided to give Emefiele a second term in office.

With a weak economic base, owing largely to a mono-product economy of the Nigerian state, all hands must be on deck to change the direction of the economy in order to stimulate growth. This is not sloganeering or rhetoric. The future of the economy depends on a prudent management of monetary and fiscal policies in order to maintain a healthy equilibrium.

Growth rates projections and targets must be achieved if not totally but by a healthy percentage. It is in the aspect of diversifying the economy that the nation must wake up. Agriculture is crucial if this policy objective must be achieved. For example, a country which consumes rice as virtually its staple food cannot afford to spend millions of hard earned currency on rice importation. That of palm oil is even more embarrassing. Although palm oil is native to the Nigerian environment, and can be planted, cultivated and grown within a short period of time, there are still businessmen who would rather import that product. To encourage local production of strategic crops and produce, the CBN has promised to “ensure adequate support to the producers of products such as rice, fish, tomato, textile, palm oil and others.” This, the apex bank has promised to achieve through intervention funds at single interest rates for palm oil and local manufacturers of textile.

One of the outcomes of the careful management of monetary and fiscal policies is the decision of government to block the accounts in Nigerian banks of those who have been branded ‘economic saboteurs.’ They are branded saboteurs because of deep involvement in smuggling and dumping of goods like textile, rice and palm oil. Any Nigerian who is forty years abroad would be familiar with the textile mills that dotted the Nigerian economic space. Suddenly they all collapsed and almost all fabrics are imported into Nigeria. Sometimes this gives me a déjà vu feeling because it brings to mind that ‘Wonyosi’ scandal of the 1970s when imported lace was seen as the acme of civilization. That material was produced only for the Nigerian market yet no factories were established to produce it in Nigeria. Nobody bothers about expensive lace materials anymore for simple occasions. The fad now is the simple Ankara material. Sadly, the Ankara material is imported. If the efforts of CBN pay off, such fabrics would be produced in Nigeria. The multiplier effect of such a fiscal measure would be radical.

The same scenario affects rice production. There is hardly any family that goes without rice in a day yet this important food item was a constant on the importation list. The borders ever so porous helped this unhealthy perspective to business as carried out by unscrupulous businessmen. Even when rice importation was banned, it simply boosted the smuggling industry. CBN has targeted the bank accounts of such businessmen with a view to putting a stop to their acts of sabotage. But CBN must make sure that local rice is cheaper than imported rice by putting in place measures that would make this possible. Single digits interest loans are in order. Also, the farming space should be expanded to accommodate more farmers and businessmen. The larger the scale of production of rice, the better the chances of rapid growth would be, thereby bringing down prices for the sake of the ordinary Nigerian.

The effort of CBN to deal with the issue of insider collusion is also another fiscal measure that would help the economy. Banks are under obligation to provide details about importers of banned products. If they fail they will come under CBN sanctions. Much too often banks are interested in quick returns on investment, no matter how suspicious the investment is. They are also very adept at protecting their customers. In the very dire situation we have found ourselves as a nation the hands of CBN and other enforcement agencies should be strengthened to ensure maximum compliance. It is common knowledge that some industry players believe that they are above the law and that a call to Aso Rock would give them special waivers. This practice must stop forthwith. It is in the overall interest of Nigerians for the rules to be applied.

Compliance and full enforcement of all monetary and fiscal policies will have a tremendous impact on the economy. Apart from boosting the foreign reserves of the country, it would also stem capital flight and increase the GDP because of the increase in commercial activities in the subsectors of the economy which we had identified. A well funded programme on rice production, for example, would create employment for millions and make a healthier variety of rice available to the people of Nigeria. The way to go therefore is steady the course on a harmonious relationship between monetary and fiscal policies.