Interview : Godwin Emefiele

How have Nigeria’s monetary policies succeeded in boosting the economy since the recession?

GODWIN EMEFIELE: The decline in export earnings due to the falling oil prices that started in late 2015 significantly impacted GDP growth, causing inflation to rise to over 18% in January 2017 and external reserves to fall to a low of $23bn in October 2016. In response to these challenges, the CBN implemented a series of measures to boost economic activity. The monetary policy rate was raised in July 2016 from 12% to 14%. Countervailing measures were taken to conserve foreign exchange (FX) by restricting imports of goods that can be produced domestically and creating a new FX window for investors and exporters. The CBN also directly intervened in the agriculture and manufacturing sectors. These and other measures, along with improvements in oil production, led to a recovery in GDP growth in 2017. The introduction of the investors and exporters window brought about improved availability of FX. Reserves also rose to over $45bn in August 2018, while inflation dropped to about 11%. We have observed marked improvements in investor confidence and business sentiments, and the latest GDP figures for 2018 indicate that the service, agriculture and manufacturing sectors are all experiencing growth.

How is the CBN addressing the challenges faced by smallholder farms in raising capital?

EMEFIELE: The CBN has developed and implemented several initiatives designed to improve access to finance for smallholder farmers. One initiative developed in 2015 is the Anchor Borrowers’ Programme. Under this scheme, which has supported over 400,000 smallholders, farmers are grouped into cooperatives that are focused on cultivating special crops and single digit loans are then provided to these farmers through their cooperatives. Collaterals are not required for these loans as cooperative members cross-guarantee one another. These farmers are then linked to an anchor firm which agrees to purchase the cultivated crops. The loan includes support to farmers, such as training by extension workers, insurance coverage, fertiliser and high-yielding seeds. These initiatives will improve the productivity of farmers and, by extension, increase wealth and employment in rural communities. This scheme further encourages financial inclusion; farmers are provided with a biometric verification number and a bank account. The objective is to develop a credit scoring matrix for these farmers in order to encourage good credit culture. The scheme has yielded good results in improving agricultural productivity nationwide, particularly in the production of key crops such as rice, tomatoes, maize and cotton.

What additional interventions are in place to support the growth of SMEs?

EMEFIELE: We are working to enhance the capacity of SMEs through our entrepreneurship development centres, as well as improving their access to finance. The National Collateral Registry is a CBN initiative designed to improve access to finance for SMEs and smallholders. It allows lenders to accept movable assets as collateral, thereby easing collateral constraints. To date, 519 financial institutions are involved in this initiative and a total of 31,193 financing statements valued at N656.8bn ($2.1bn), $33m and €6.1m have been registered. The Agri-business/Small and Medium Enterprises Investment Scheme is also geared towards helping SMEs. This scheme mobilises a portion of the profit after tax of commercial banks to provide financing for small businesses. The Real Sector Support Facility was also recently introduced, which allows commercial banks to finance projects in the agriculture and manufacturing sector. The Small and Medium Enterprises Refinancing and Restructuring Facility was established in 2010 to refinance banks’ exposures to SMEs. A total of 604 businesses have been financed under this scheme so far, with N300.9bn ($972.8m) worth of funds allocated.