The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, on Tuesday appealed to bandits and others involved in unlawful activities to drop their arms and embrace the central bank’s Anchor Borrowers’ Programme (ABP).
He also announced that the central bank has been encouraged to increase its COVID-19 Targeted Credit Facility to N400 billion from N300 billion.
Emefiele, while addressing journalists after a two-day meeting of the Monetary Policy Committee (MPC) in Abuja, also reiterated that cyptocurrency currently has no place in the Nigerian financial system.
At the end of the meeting, the MPC resolved to retain the Monetary Policy Rate (MPR) otherwise known as interest rate at 11.5 per cent.
The MPC also voted to maintain the asymmetric corridor of +100/-700 basis points around the MPR and left the Cash Reserve Ratio at 27.5 per cent and Liquidity Ratio at 30 per cent.
The MPR is the rate at which the CBN lends to commercial banks and often determines the cost of borrowing in the economy.
According to Emefiele, his appeal to criminals to embrace family is because there is a linkage between security and economic growth.
Responding to a question, he said: “If you want an economy to grow, the level of insecurity must be low because if there is a high level of insecurity like what we see today, the economy will suffer.”
He added that security agencies are doing their best to tackle insecurity.
“Efforts are now targeted at the south-eastern and north-eastern parts of the country. About three years ago, the federal government and the United States signed a pact that resulted in a government-to-government acquisition of military equipment.
“Out of which, we are expecting 12 fighter planes that would help us solve our insecurity. I am aware that six of them are coming to the country in the month of July and August.
“I, therefore, would like to appeal to our brothers, who decide that they want to live in bushes and forests, that they should please, begin to retreat, drop their arms and come and embrace the anchor borrowers’ programme.
“If they do so, it will help them; if they choose not to do so, they will be confronted by the security as this battle continues.
“I am optimistic before the end of the year that the security challenges confronting the country will substantially abate,” he stated.
Emefiele said the current targeted facility, which was unveiled to provide succour to households and SMEs amidst the harsh impact of the pandemic, “almost the whole of N300 billion has now been disbursed.”
He said the proposed increase would make more available to households and small businesses for them, “to go back to business which will ultimately yield employment and also grow our economy.”
Emefiele stated that the idea of operating a digital currency will soon become a reality in the country, adding that the central bank has already set up its committee, which is working on the concept.
Emefiele, who read the committee’s communiqué, said although the economy had successfully exited recession, the recovery was fragile given that the GDP of 0.51 per cent was still far below population growth rate.
He said the committee was therefore, of the view that, there was a need for monetary authorities to consolidate on all administrative measures taken not only to rein in inflation, but also on the actions so far taken to grow output.
He said in the committee’s view, such measures should include boosting consumption and investments, as well as diversifying the base of the economy through FX restrictions for the importation of goods and food products that can be produced in Nigeria.
The MPC also urged the bank to continue to put in place measures that will boost export earnings.
Responding to a question on the recent Q1 GDP figures, Emefiele said: “I think it is important to say at the CBN we were not surprised. We were not surprised because Nigeria is one country that is peculiar for what I call a situation that is out of the ordinary. That is because Nigeria is one country among several others challenged by stagflation.
“Stagflation is a situation where inflation is running high and prices are running high and at same time output growth is contracting. If you understand how this works, you will understand that as MPC, your core responsibility is to rein inflation by ensuring that you keep supreme your price stability mandate. And to do so means you have to tighten to rein inflation.
“On the other hand, government is confronted with contracting output and the normal way to recover from such is to stimulate the economy by injecting liquidity into the system.”
Emefiele said on consumption and investment, the committee noted that the intervention facilities under the anchor borrowers programme was N631.4 billion granted to 3,107,949 small holder farmers cultivating 3.8 million of land hectares; for the AGSMEIS, N111.7 billion to 29,026 beneficiaries; and for the Targeted Credit Facility, N253.4 billion to 548,345 beneficiaries – comprising 470,969 households and 77,376 SMEs.
The committee, according to him, noted that notwithstanding that all these have helped in boosting output, the CBN should continue to aggressively increase its interventions in these subsectors, including agricultural processing and manufacturing.
He said under the National Youth Investment Fund, N2.04 billion was disbursed to 7,057 beneficiaries, of which 4,411 were individuals and 2,646 were SMEs.
Also, under the Creative Industry Financing Initiative, the CBN has disbursed N3.19 billion to 341 beneficiaries across movie production, movie distribution, music and software development.
Also commenting on the recent controversy regarding state governments repaying their loan obligations to banks as well as those under the CBN intervention facilities, Emefiele said the state governors must honour their loan agreements to parties involved.
He added: “There are two aspects to these. There are intervention facilities granted by the CBN and there are bilateral facilities granted by the deposit money banks to them.
“They went to deposit money banks, they asked for loans, they signed the offer letters with those banks.
“They gave their ISPOs to the federal ministry of finance that on a monthly basis, the minister of finance should deduct from their money and pay the banks for the loans they have taken.
“And I am aware that the banks have written to finance and they have copied me that they want their money.
“If it was a bilateral loan agreement, in fact, there is privacy of contract, yes, I am not part of it, they should pay their loans.
“On the CBN intervention facility to the state governments, we are engaging the National Economic Council (NEC) and CBN is also insisting on its loan to be paid.
“But depending on the outcome of the engagement between CBN, finance and NEC, we will begin to take the monies but in any case it’s good for you to be a good debtor – when you take a loan you pay so that when you go back to the bank, you can get. But if refuse to pay, you will never smell the doorstep of the banker again.”
He said while the CBN had extended repayment on its loan interventions till next year as part of the forbearances to cushion the impact of the pandemic, banks deserved the right to demand repayment of their loan disbursements following the rebound in economic activities.
He said: “In any case, the banks I must admit are seeking that there are some improvements in the economy, fragile as it may be- there are some improvements – crude prices have gone up and business activities are beginning to regain energy and life again.
“And if the banks ask for the repayment of their facilities, it will be justified.
“You raised the issue of interest rates, that the banks are charging high interest rates. If we admit at CBN that we are controlling money supply and the banks raise interest rates in what I can call non-employment generating sectors or non-output generating sectors of the economy, we can’t fault them.
“Because we have our own intervention facility that are meant to target agriculture, SMEs and targeted households, which are meant to stimulate employment and also stimulate output for the country.”
On whether the CBN had been vindicated following the crash of cryptocurrency market after the apex bank had opposed its operations in the country, Emefiele said it was not about CBN being vindicated.
He added that the CBN investigated and found out that a substantial percentage of Nigerians are involved in cryptocurrency which is “not the best.”
He said: “Don’t get me wrong, some may be legitimate but I dare say most are illegitimate and I will corroborate that. Under cryptocurrency and bitcoin, Nigeria comes second right? But in the global size of the economy, Nigeria comes 27th.
“So do you think that there is some correlation? You think those countries whose economies are second and 26th will allow you to grow your cryptocurrency business to second position, if what is inside is a big deal that is going to profit everybody?”
Emefiele added: “Of course, we saw it that the market collapsed…Elon Musk twitted sometime about the time the CBN said our banking and payment infrastructure will no longer be available for cryptocurrency transactions – he twitted, that he was going to invest about $1.5 billion in crypto and the rates went to the highest roof.
“And he then twitted again and raised a fee concerns and the thing plunged. Elon Musk had himself decided that he will no longer deal in cryptos.
“And so if a man who felt it was good suddenly decides to say it’s no longer good and then you…don’t forget, those who invented crypto said it is encrypted.
“When they say it’s encrypted, it means that whatever is happening between me and you is only know to the two of us. And you know what? In case I defraud you because it is encrypted,y ou can’t even disclose my name and you can’t even get your money back.”
However, the CBN, while commending government’s efforts in combating the headwinds imposed by the pandemic, advised against another nationwide lockdown as was experienced in 2020, adding that this will reverse the gains jointly achieved between the government and the apex bank in response to the outbreak of COVID-19.
He said the MPC assessed the options on direction of policy in the short to medium term and re-appraised current measures by the government to purchase COVID-19 vaccines and the general preparedness of relevant public health agencies to guard against the spread of the mutating strains of the virus.
According to him, the committee noted the appropriate steps taken by the government to ensure that up to 70 per cent of the population get vaccinated to drastically drive down the infection rate in the country and hence, sustain economic activities.
He said:”The committee noted the persisting security crisis, especially in major food producing regions of the country and the severe toll on food supply and prices. It noted that inflation had moderated marginally due to the unrelenting effort of the bank in supporting agriculture to boost food supply and prices.
“The committee, thus, reiterated its call to the government to intensify effort towards addressing the security situation in the country to ease supply bottlenecks and bring down food prices.
“The MPC further noted government’s commitment towards investing in public infrastructure despite constrained fiscal position and urged a continued focus on this objective, while exploring the option of effective partnership with the private sector, as improved road networks, telecommunications and power supply will greatly and proactively impact the supply chain and moderate price increments.”
Emefiele also stressed the need for collaboration with Nigeria’s huge population living abroad, through the issuance of diaspora bonds targeted at specific infrastructure projects.
This is even as the committee noted that the public debt stock was currently high, it was of the view that project specific diaspora bond issues could conveniently pay itself back without imposing a burden on government finances.
The committee also noted the complementary role this would play in boosting foreign exchange supply, accretion to reserves and easing of the current exchange rate pressure.
In arriving at a decision to hold the rates, Emefiele said whereas the committee remained committed to supporting the efforts of the federal government in restorating the productive capacity of the economy, members remained much more focused towards achieving price stability in the short to medium-term.
He stated that economic growth could be hampered in an environment of unstable prices adding therefore, that the choice between loosening the stance of policy to ease credit further or tightening to moderate price development or maintaining a hold stance in order to allow previous policy measures continue to permeate the economy while observing global and domestic developments.
He said an expansionary stance of policy could transmit to reduced pricing of the loan portfolios of Deposit Money Banks and result, therefore, in cheaper credit to the real sector of the economy.
He added, however, that this expected transmission may be constrained by persisting security challenges and infrastructural deficits.
“On the other hand, while a contractionary stance will only address the monetary component of price development, supply side constraints such as the security crisis and infrastructural deficits can only be addressed by policies outside the purview of the central bank.
“A tight stance in the view of members, will also hamper the bank’s objectives of providing low cost credit to households, Micro Small and Medium Enterprises (MSMEs), Agriculture, and other output growth and employment stimulating sectors of the economy,” he said.
James Emejo in Abuja