Our involvement in agric, others is to ensure real economic growth-CBN

.There is nothing unusual about what CBN is doing – Okoroafor

.As IMF ranks Nigeria world’s ‘second worst’ in use of sovereign wealth fund

Motolani Oseni

Following the International Monetary Fund (IMF) recommendation that the Central Bank of Nigeria (CBN) should end its direct intervention in the economy and focus on its key mandate, which is ensuring price stability, Nigeria’s apex bank has said that its involvement in financing agriculture, infrastructure and Micro Small and Medium Enterprises (MSMEs) is to ensure real growth in the economy.

This is even as the global lender ranked Nigeria as the second worst country in the world in the use of sovereign wealth funds.

But earlier in the week amid trade tensions and a potentially disorderly British exit from the European Union, IMF cut its global economic growth forecasts for 2019, but said Nigeria’s economy will grow by 2.1 per cent by the end of this year.

Reacting to the IMF recommendation that the CBN should end its direct intervention in the economy and focus on its key mandate, which is ensuring price stability, the CBN’s Director, Corporate Communication, Mr. Isaac Okorafor, on Wednesday, said: “There is nothing unusual about what the CBN is doing. We agree with the IMF that one of the core functions of the Central Bank in any country is to maintain price stability”.

He explained that the International Monetary Fund said that the CBN should focus on inflation targeting, but that is just one bit of it, stressing that IMF will expect us to import food and not make arrangements to produce our own foods.

According to him, the CBN is funding farmers who will grow food, supply to our people and by doing so reduce the price of food in the market.

He said that food was responsible for about 50 per cent of the causes of price increase in Nigeria, saying, “so what we are doing is delivering on our core function which is ensuring that there is price stability.

“By giving easy credit to farmers who will produce food and bring down the price of food, we are delivering on price stability’’, he added.

The CBN spokesman explained further that the apex the bank was also intervening in infrastructure because of the present high cost of doing business drove up interest rate as well as other costs.

He said that the bank’s strategy was already yielding positive results and millions of jobs had already been created through the provision of credit to farmers and small scale enterprises.

The CBN, under Mr. Godwin Emefiele’s leadership, is acting as a financial catalyst in specific sectors of the economy particularly agriculture, Okorafor said.

The aim is part of efforts to create jobs, improve local food production, and conserve scarce foreign reserves, he further explained.

He said that Emefiele has introduced the Youth Innovative Entrepreneurship Development Programme (YIEDP) inaugurated in March 2016 which targeted 10,000 youths within four years.

Okorafor said under the scheme, a credit line of up to N3 million was made available to each eligible youth, while recipients who made good utilisation of the funds were encouraged to migrate to other CBN intervention schemes to access more funds.

He said that the Anchor Borrowers’ Programme (ABP) inaugurated by President Muhammadu Buhari was one of the intervention schemed introduced by the CBN.

The programme is aimed at creating economic linkages between more than 600,000 smallholder farmers and reputable large-scale processors with a view to increasing agricultural output.

Under the programme, he said the sum of N40 billion was set aside from the N220 billion MSMEs Development Fund for farmers at a single-digit interest rate of nine per cent.

“Also, an N300 billion Real Sector Support Fund (RSSF) was established as part of efforts to unlock the potential of the real sector to engender output growth, value added productivity and job creation.

 “Similarly, we have the N213 Billion Nigerian Electricity Market Stabilisation Facility (NEMSF).

“It is aimed at settling certain outstanding debts in the Nigerian Electricity Supply Industry (NESI).  Under the fund, the sum of N56.68 billion has been disbursed to five generating power companies and five distribution companies.

“Under the Health Sector Initiatives, the CBN plans to establish at least one Wellness and Diagnostic Centre (WDC) in each of the six geopolitical zones of the country.’’

According to the Fiscal Monitor report released on Wednesday, Qatar was the only country worse than Nigeria in the use of sovereign wealth fund.

The IMF said the index was compiled using the corporate governance and transparency scores of the sovereign wealth funds and the size of assets as a percentage of 2016 GDP of the countries considered.

The fund said it used data compiled by the Natural Resource Governance Institute and Worldwide Governance Indicators.

 “It is critical to developing a strong institutional framework to manage these resources—including good management of the financial assets kept in sovereign wealth funds—and to ensure that proceeds are appropriately spent,” the report read.

“This remains a significant challenge in many resource-rich countries that, on average, have weaker institutions and higher corruption.

“The governance challenges of commodity-rich countries— that is, the management of public assets— call for ensuring a high degree of transparency and accountability in the exploration of such resources.

“Countries should develop frameworks that limit discretion, given the high risk of abuse, and allow for heavy scrutiny.”

Explaining that sovereign wealth funds have to be transparent, the IMF advised that countries should ensure that the natural resources of countries should be channeled properly to the people that need them.

Of the 10 African countries considered, Ghana was ranked the highest.

Consequently, the IMF believed that Nigeria’s economy will expand a little faster than its earlier projection, representing an increase of 0.1per cent points from the 2 per cent projected in January.

The global lender disclosed this in the World Economic Outlook report released on Tuesday at the ongoing spring meetings of the IMF and World Bank Group.

The fund noted that some major economies, including China and Germany, might need to take short-term actions to prop up growth and that a severe downturn could require coordinated stimulus measures.

The IMF said it still expects that a sharp the slowdown in Europe and some emerging market economies will give way to a general re-acceleration in the second half of 2019.

Consequently, the global lender had cut its growth projection for Nigeria’s economy from the 2.3per cent contained in the October 2018 report to 2 per cent blaming softening oil prices.

The Africa largest economy growth is expected to pick up to 3.5 per cent in 2019 and 3.7 per cent in 2020 (from 3.0 per cent in 2018),” the report read.

 “The projection is 0.3 percentage point and 0.2 percentage point lower for 2019 and 2020, respectively, than in October 2018 WEO, reflecting downward revisions for Angola and Nigeria with the softening of oil prices.

“Growth prospects for commodity exporters are weighed down by the soft outlook for commodity prices, including for Nigeria and Angola, where growth is expected to reach about 2.6 per cent and 3.9 per cent, respectively, in the medium term.”

Speaking on the projection, Oya Celasun, the chief of the World Economic Studies division of the IMF’s research department said Brexit and softening oil prices are the main risks to Nigeria’s economy in the short term.

“We expect a growth recovery, growth was reasonably strong last year and we think that things will improve a bit going forward”, she said.