In recent time, the term ‘Economic Nationalism’ has dominated every discourse where the Central Bank of Nigeria (CBN) is involved. Economists refer to Economic Nationalism as an economic policy perspective favouring government intervention in the market process to correct market failures and promote general welfare of the people.
Such interventions can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting income equality, managing the money supply and interest rates, increasing profits, among others.
Incidentally, this phrase did not start today or with Godwin Emefiele and Donald Trump. Nigeria in 1972 under the former Head of State General Yakubu Gowon (rtd), promulgated the Nigerian Enterprises Promotion Decree also known as Indigenization Decree. The aim of the policy was to create opportunities for Nigerian indigenous businessmen; maximize local retention of profits and to raise intermediate capital and goods production.
Unfortunately, successive administrations lost the vision and Nigeria drifted away from economic realities to the point that almost every conceivable thing is imported as value added production became dead.
Emefiele assumed the mantle of leadership of the central bank of Nigeria in June 2014, and was almost immediately confronted by high inflation, falling oil revenue, value-eroding local currency as speculators and round-trippers held sway. Embarrassingly, the economy became ‘dollarised.’ The former Zenith Bank Managing Director saw the situation as peculiar, and initiated peculiar policies with a little touch of conventional theories.
The policies enunciated under Emefiele towards promoting price and monetary stability, exchange rate stability, financial system stability, as well as efforts to spur growth through development finance interventions have been adjudged Economic Nationalism . The organized labour is interested in the entire architecture, mainly because all these are geared towards promoting the welfare of Nigerians through job creation and increased local productivity.
According to the labour leaders, these policies are employment spinning, especially in the agriculture and textile industries. The bailout fund to states helped to offset salary backlogs. The items designated not eligible for foreign Exchange (forex) has curbed massive importation and allowed local manufacturing to grow via Import substitution. These formed the basis for the interactive sessions as activities of the apex bank to improve the economy came into limelight.
During the interactive sessions which took place in Owerri, Imo State, Lagos and others, there were representatives from the National Union Of Textile, Garment And Tailoring Workers Of Nigeria (NUTGTWN) and other private sector unions affiliated to the Nigeria Labour Congress (NLC). The organised labour itself, which comprised of the NLC, Trade Union Congress (TUC) and United Labour Congress (ULC), all together, had their representatives present.
Prominent labour leaders that joined the interaction from the South West end were: Comrade Funmi Sessi, chairperson, NLC Lagos State Council; Comrade Latifat Okanlawon, chairperson, NLC Ogun State Women Committee; Comrade Arogundade Tejuosho, President, Nigeria Union of Tailors, Lagos State chapter; Comrade Bola Awoyemi, State Secretary, Senior Staff Association of Nigerian Universities (SSANU), Lagos State Council.
Speaking, General Secretary of the National Union of Textile Garment and Tailoring Workers of Nigeria (NUTGWTN), Comrade Issa Aremu said the current CBN has done well through its numerous interventions in the various sectors of the economy.
He, however, advised that the country, through CBN should work towards a single-digit inflation rate, saying the CBN should be supported by all and sundry to revive the comatose manufacturing sector of Nigeria.
His words: “I must say that the re-appointment of the CBN governor for second term is commendable. From the day he assumed office as the governor of CBN, his goal has been to have a monetary policy that will improve production and create jobs. For us, you can agree with me that if there are no companies, there will be no workers and if there are no workers there cannot be a union. And if there are no unions, there cannot be leaders of unions that are here.
“So, I think we should partner with CBN as organized labour to realize its objectives especially in the area of development financing. There was a time Nigeria was a workers’ destination for Africans and other nationals.”
According to Aremu, at a point in Nigeria’s history, the country survived on revenues from the non-oil sector, to the extent that it became a dominant exporter of agricultural produce into the global market. Some of these products include, cocoa, groundnut, cotton and palm oil.
Nigeria’s focus in agriculture supported the raw material needs of the industrial sector and created employment opportunities for millions of Nigerians, he added.
President Buhari announced in his inaugural speech that he will create 100 million jobs in the next 10 years. To the labour leader, this is in line with CBN programmes and “if I have my way, I will tell the president to make it 250 million jobs.”
According to him, in the forex market, the key word is stability. The naira has been stable for quite some time. “Inflation is hovering around 11 per cent but it is not over until it is over. I think we should work towards single digit. Organized labour should watch what is going on because there are forces that want naira to be devalued. I think we need to support CBN against some of these interests.”
On development financing, he said the CBN is creatively supporting the business sector of the economy with the aim of increasing production, increasing capacity utilization and “protecting our jobs.”
Although, a herd of experts and policy analysts have criticized the apex banking sector regulator on the grounds that it is entering areas that are meant for other government ministries and that the best way to solve a problem is not to throw money at it, others have equally agreed that the CBN has achieved a lot of positives that deserve commendation.
Managing Director and Chief Executive Officer, Financial Derivatives Company (FDC) Limited Mr Bismark Rewane and his team of analysts recently arrived at the conclusion that given the successes recorded by CBN in the past, its macroeconomic and financial stability target of single digit inflation rate and double digit growth rate; promise to boost financial inclusion through investment in payment system infrastructure that will enable 95 per cent of Nigerians have access to finance by 2024 are achievable.
Emefiele also promised that CBN under his leadership will strive to reduce high cost of obtaining mortgage loans to enable more Nigerians get affordable houses. He further assured of a boost to the external reserves, currently at $45.09 billion and that recapitalization of banks will be pursued while targeting a reduced non-performing loans in banks to about 9 per cent in 2019.
Although Rewane criticized the multiple exchange rate regime of the CBN, he agreed that the rates are converging and returning to normalcy. In a CNBC interview monitored in Lagos, Rewane said apart from recapitalization, another way to encourage banks to raise capital buffers is to approve reduction of dividend payout.
The Head of Research at FSDH Merchant Bank, Mr Ayodele Akinwunmi, agreed with the policies, saying that with the double-digit growth the CBN governor has said he would be targeting in the next five years, recapitalising the banks would be essential.
“As the economy grows, lending activities would increase and more viable lending opportunities would be thrown up. As that increases, the capital that banks would require to support the expected increase in lending would increase.
“So, it is going to be a win-win for everyone. For me, if we are expecting double-digit growth in the Gross Domestic Product, then the financial system must then be well capitalized to ensure that they support that growth that we are expecting.
To a public policy analyst, Mr Innocent Onyeabuchi, the Anchor Borrowers’ Programme (ABP) of the apex bank, revolutionized rice production, as it currently has over 925, 000 farmers enrolled, with over 10 millions jobs created (direct and indirect). The Investors and Exporters’ Window created by Emefiele has attracted over $50 billion investments into the country within a spate of three years. Also, inflation rate has been brought down from 18 per cent to about 11.8 per cent as at May 2019.
Onyeabuchi further said the central bank governor’ has been able to rally commercial banks’ chief executives to support his vision in growing the economy by setting aside five per cent of their annual profit to finance agriculture and the real sector to create jobs and wealth.
In what he termed a tripod structure erected by the CBN to enhance financial inclusion strategy, Onyeabuchi commended the bank in his recent article.
By this, the CBN is promoting the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL); the Bankers’ Committee and NIPOST agreed to establish the national microfinance bank in 774 local government areas of the country to make cheap and sustainable credit at single digit interest rate available to the economic active but poor rural dwellers, particularly the farmers and petty businesses.
Some industry watchers have concluded that restriction on the 43 items is Emefiele’s own protectionist agenda designed to drastically reduce imports and encourage local production and create jobs, in line with Global economic protectionism like the BREXIT, and in particular, the unending trade war between United States of America and China.
Also, at the heart of the policy was the desire to spur domestic economy which had been swallowed with warped taste for foreign goods and enhance production of the suspended items.
The CBN has succeeded in achieving unbroken three-year stability in the foreign exchange market according to Onyeabuchi, and has encouraged foreign direct investments (FDI) into Nigeria and importantly, Emefiele has coined his own brand of economic nationalism – Produce, Add Value and Export (PAVE).
In agreement with Onyeabuchi, Aremu stated: “There is availability of local rice in Nigeria. The argument of CBN concerning the 43 items is tenable. Why should we make scarce foreign exchange available for people to import products that we can produce within the country? For us today, that has protected a lot of jobs.
“I think we should commend the CBN and encourage the apex bank to continue in its good job. We have to support CBN because if Nigeria can produce those 43 items locally, our factories will recover. Already, about 2.8million jobs have been created through the CBN ABP interventions. You can imagine if we replicate that in other sectors like Textile and others.
“Emefiele has a way of interacting with stakeholders and taking ideas from such interactions into consideration, so he is a comrade,” Aremu concluded.
To the CBN Director of Corporate Communications, Mr Isaac Okoroafor, the governor is called a comrade because “the first day he took office, his vision was titled: ‘a people focused central bank.’ It means that all the policies from the central bank was to be underpinned and dictated by the welfare of the people.
“Following from that, he initiated the ABP which was targeted at the people within the base of the pyramid; the farmers. He looked at millions of Nigerian workers who have been rendered jobless for years because the elite conspired among themselves to be exporting our jobs abroad by massive importation.
“They imported tooth paste, tomato, garri, palm oil, Nigerian print made in China, eggs from South Africa,” Okoroafor said. At a time, about 20 million eggs was being imported into the country every day.
“We depended on wheat from Zambia. We imported Fish from Norway. They import toothpick. Aswani market in Lagos used to be the largest textile market in Africa. People from Togo, Mali, Niger, Ghana Siera Leon and even central Africa used to come their to buy Nigeria prints. Today, Aswani is a shadow of itself,” the director stated.
He explained that all these were imported using Nigeria’s foreign exchange. Inflation which was the greatest enemy of the workers was high and the CBN looked at all these and said ‹why should we keep importing?’”
He further said that, “Our poultry farmers are here, why should we keep importing chicken and 20 million eggs every day? So many people are into fishery, why should we be importing fish. Let us eat what we produce and produce what we eat. So, if you must import those things, there is no law that says central bank must supply you foreign exchange. No central bank does it in the world. Go and look for your foreign exchange somewhere. We only supply foreign exchange to those who import the things we need to convert Nigerian raw materials to finished products,” Okoroafor explained to participants.
Okoroafor was also quick to clarify that Nigeria has not broken any World Trade Organisation (WTO) agreement by the restriction placed on providing foreign exchange on importation of 43 items into the country.
According to him, the CBN imposed the ban on 41 items initially before adding two items – textile products and palm oil – to stop the exportation of Nigerian jobs abroad and trigger massive local production. Okoroafor explained that the bank did this despite the attacks on the CBN especially from Lagos, the commercial nerve centre of the country.
Results and implications of CBN’s efforts
While unveiling his blueprint for the economy, Emefiele recalled that with concerted efforts by the monetary and fiscal authorities, the apex banking sector regulator implemented a series of measures which led to the recovery of Nigeria’s economy from recession by the first quarter of 2017. For instance, the CBN increased the monetary policy rate (benchmark interest rate) in order to bring down inflation. This according to him, has dropped from 18.72 per cent in January 2017 to 11.40 per cent in May 2019.
It created an Investors and Exporters Foreign Exchange (Forex) Window which allowed exporters and investors to bring in, and sell their foreign exchange at the prevailing market rate. He said the Naira to Dollar exchange rate has appreciated from over N525/$1 in February 2017 at the Bureau De Change (BDC) window to N360/$1. With improved inflow of foreign exchange, the exchange rate has remained stable around N360/$1 for the past 27 months.
Before outlining the bank’s vision and policy thrust for the next five years, the CBN governor recalled how access to foreign exchange on 43 items was restricted, while deploying intervention funds to support growth and productivity in the agricultural and manufacturing sectors. This was aimed at reducing reliance on the importation of items which could be produced in Nigeria.
The bank increased its development finance interventions in order to catalyse growth in critical sectors of the economy and reduce Nigeria’s reliance on crude oil revenues. The oil industry itself does not employ a good number of Nigerians.
There was therefore, increased investments by the Small and Medium scale Enterprises (SMEs) as well as more consumer spending. These, and many more measures according to Emefiele, had positive impact on Gross Domestic Products (GDP) growth and employment. They also “helped to support the attainment of our monetary policy objectives such as a reduction in the inflation rate, stability in our exchange rate and improved accretion to our external reserves,” Emefiele stated.
Okoroafor further corroborated Emefiele’s assessments. He said the naira at a time exchanged for as high as N500, but through CBN’s strategic interventions, it has been brought to N360 at the Bureau De Change segment and inflation to as low as 11.4 per cent. These are policies driven by a commitment to ensure that people do not suffer unnecessarily.
The director observed that Nigerian youths are good at creating software applications, stressing that Nigeria dominates the African film and music industry. So, CBN is putting together a fund that will enable the country build an Information Technology (IT) hub, a music and film academy, get the best trainers abroad in order to harness the youths creative energy and provide them with bank loans to do their best.
On counterfeit and dirty naira in circulation, he revealed that for each single note of counterfeit discovered from any Automated Teller Machine (ATM), the bank that owns that ATM will pay N1 million, whether the note is N5, N10, N20, or N1000. If any ATM machine is dispensing counterfeit notes, Okoroafor said the banking public should call CBN and “our people will move in.”
Countries preoccupied with growth and development issues (like Nigeria) use their Central Banks to keep the economy on course through activist macro-economics (Economic nationalism), with respect to pricing, (inflation), exchange rates, interest rates, capacity utilisation, employment, external reserves building and above all, development financing.
South Africa’s Federal Reserve and its remarkable performance with respect to macroeconomics are central to the successive victories of ANC government since 1994 confirming the validity of the received wisdom that the Bank of last resort anywhere works towards growth and development, capacity utilisation and employment creation.
CBN has assured that in the next five years, it will consolidate on the exchange rate availability and stability so as to allow for planning and investment decisions. .
Certainly, stakeholders want the CBN to sustain the measures that stabilised the exchange rate amidst escalated pressures from speculators, round-trippers and rent-seekers.
The policy objectives, such as encouraging local production of the items and boosting local industries suffocated by the importation of competing products, are being realised.
There is a consensus opinion that it is a collective duty of citizens to ensure that the potential and prospects of the economy are optimally realized. The ongoing economic recovery requires the joint efforts and wise counsel of everyone, Nigeria must take giant strides forward.