Godwin Emefiele taking his second term oath office as CBN governor.

...harps on enhanced local manufacturing sector 

By Obinna Ezugwu

Godwin Emefiele, Central Bank of Nigeria (CBN) governor, has rolled out elaborate measures to grow the Nigerian economy and strengthen the manufacturing base of the country in anticipation of a more nationalistic approach to economic issues by countries of the world in the aftermath of the Coronavirus pandemic.

Emefiele noted, in the policy statement titled, “Turning The COVID-19 Tragedy Into An Opportunity For A New Nigeria,” that the pandemic has forced countries around the world to move away from multilateralism and responded by fighting for themselves with several measures to protect their own people and economies, regardless of spillover effects on the rest of the world.

He pointed out that according to the World Customs Organization, a total of 32 countries and territories have adopted stringent and immediate export restrictions on critical medical supplies and drugs that were specifically meant to respond to the virus, noting that such measures were likely to continue even after the virus must have been contained, hence the need for Nigeria to develop more robust manufacturing sector and rely less on import.

Emefiele said the apex bank has developed policy response timeline to guide crisis management and reboot the economy.

In the immediate term of zero to three months, Emefiele said the bank will ensure financial systems stability by granting regulatory forbearance to banks to restructure terms of facilities in affected sectors, trigger banks and other financial institutions to roll out business continuity processes to ensure that banking services are delivered in a safe social distance regime for all customers and bankers, granting additional moratorium of 1 year on CBN facilities, reducing interest rates on intervention facilities from 9 percent to 5 percent, creating of N50 billion targeted credit facility for affected households & SMEs, strengthening the Loan to Deposit Ratio policy, providing additional N100 billion intervention in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity, providing N1 trillion in loans to boost local manufacturing and production across critical sectors, among others.

In the Short-term period of zero to 12 months, Emefiele said attention would be focused on repositioning the economy.

“As part of the lessons from the current pandemic, we must ensure that our value added sector, the manufacturing industry is strengthened. Accordingly, the CBN will pursue the following in this phase 1, Reinvigorate our financial support for the manufacturing sector by expanding the intervention all through its value-chain. In most cases, we will ensure that primary products souced locally provide essential raw materials for the manufacturing sector except where they are only available overseas,” he said.

“2, With the support of the Federal Government, the CBN will embark on a project to get and private equity firms to finance homegrown and sustainable healthcare services that will help reverse medical tourism out of Nigeria. By offering long-term financing for the entire healthcare value-chain (including medicine, pharmaceuticals and critical care), banks will work with healthcare providers to consolidate on the current efforts to build our medical facilities in order to ensure Nigeria has world class affordable hospitals for the people of Nigeria and those wishing to visit Nigeria for treatment.

“3, The CBN will promote the establishment of InfraCo PLC, a world class infrastructure development vehicle, wholly focused on Nigeria, with combined debt and equity take-off capital of N15 trillion, and managed by an independent infrastructure fund manager. This fund will be utilised to support the Federal Government in building the transport infrastructure required to move agriculture products to processors, raw materials to factories and finished goods to markets, as envisaged at the CBN Going for Growth Round-table in March 2020.

“4, Continue to prioritize the provision of FX for the importation machinery and raw materials needed to drive self-sufficient Nigerian economy.”

In the Medium-Term Period of zero to three years, the governor said the bank would be focusing on growing the manufacturing sector, providing housing among others.

“Once the world returns to some new normal having tamed COVID-19 by a combination of vaccines and social distancing, and the Nigerian economy reopens fully for business we will act quickly to enable faster recovery of the economy by targeted measures towards particular sectors that are able to mass employment and wealth creation in the country. We will be focusing on four main areas, namely, light manufacturing, affordable housing, renewable energy, and cutting-edge research.

“In manufacturing, for example, it is pertinent to note that Nigeria’s gross fixed capital formation is currently estimated at N24.55 trillion made up of residential and non-residential properties, machinery and equipment, transport equipment, land improvement, research and development, and breeding stocks. Of this estimated value, machinery and equipment, which are the main inputs into economic production, are currently valued at only N2.61 trillion. In order to pursue a substantial economic renewal, including replacement of at least 25 percent of existing machinery and equipment for enhanced production, we estimate at least N662 billion worth of investments to acquire hi-tech machinery and equipment.

“Therefore, the CBN will consider an initial intervention of N500 billion over the medium term, specifically targeted at the manufacturing firms to procure state-of-the-art machinery and equipment and automated manufacturing models that fast-track local production and economic rejuvenation, as well as support increased patronage of locally processed products such as cement, steel, iron rods, and doors, amongst several other products. The recent private sector investments in cement production using enhanced technology and automated manufacturing models is a good example of the kind of economic renewal we will be pursuing in this phase. We will develop a thorough screening process and stringent criteria for equipment types that would qualify for funding under this phase.

“In order to boost job creation, household incomes and economic growth, we will be focusing our attention to bridging the housing deficit in country, by facilitating government intervention in three critical areas: housing development, mortgage finance, and institutional capacity.

“We will pursue the creation of a fund that will target housing construction for developers that provide evidence of profiled off-takers with financial capacity to repay. The current identification framework in the banking sector using the bank verification number (BVN) will be used to verify the information provided by the off-takers before the developer can access the funds. We will also be considering ways to assist the Mortgage Finance Sub-sector as well as build capacity at the state levels for their land titles promptly, implement investment friendly foreclosure laws and reduce the cost of land documentation, as this has remained a major inhibiting factor in the provision of affordable housing in the country.

“Over the next three years, we will also support the financing of economically friendly energy production, as this has tangential long-term health benefits. We will look at efforts to drive innovation and research in every sector, through our universities, research institutions, creative industry initiatives, and all other media of novelty and inventions.

“In conclusion, I believe we must now envision and work toward a Nigeria with the cutting edge medical facilities to provide world class care to the sick and vulnerable; enable our universities and research institutions to provide requisite education and training required to keep these ecosystems functioning sustainably and efficiently; and millions of Nigerians employed in meaningful and well-paying jobs. This is the Nigeria that we must aspire to build.”

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