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n recent times, Nigeria’s economy can best be described as mono-cultural as it is largely run from foreign exchange from the oil sector. However, this source of income has become unpredictable due to a number of reason that disrupt the market.
Thank you for reading this post, don't forget to subscribe!Some of these factors include conflicts in oil producing countries, deliberate efforts by countries to preserve their oil reserves, foreign exchange, smuggling. Due to climate change concerns, many countries have put in place, mechanisms to cut the use of fossil fuel and transit to cleaner energies.
As an oil producing country, these concerns have triggered efforts by the Federal Government to diversify the economy by boosting the productive and manufacturing sectors.
Unfortunately, in the past, Nigeria had a vibrant manufacturing sector, boasting of several textile companies in Kaduna, Kano, Lagos, among other cities, employing hundreds of thousands of Nigerians. Nigeria also had a range of automobile assembly plants that reduced dependence on imported vehicles, in addition to the local production of shoes, in Aba, Lagos, Onitsha, Kano, among others.
For instance, global automobile brands such as Volkswagen, Mercedes and Peugeot also had strong presence in the country’s economy, maintaining functional assembly plants and employing thousands of Nigerians.
The agricultural sector was also vibrant, with Nigeria playing a major role in global cultivation and export of crops like groundnuts, cocoa, palm nuts among others.
The over dependence on foreign exchange earnings from crude oil which started from the early 1980s led to a gradual neglect of other aspects of the economy as `petrodollars’ reigned supreme.
This gradually led to Nigerians depending on importation for essential goods and services, including those in which the country easily had comparative advantage. The consequence of this action is avoidable economic challenges, growing unemployment, heightening inflation and a weakened naira.
The Central Bank of Nigeria (CBN) has, in recent times, initiated interventionist policies and programmes geared towards reversing the trend by reviving the productive sector and diversifying the economy. As part of the push, in January, the apex bank floated the “100 for 100” Policy on Production and Productivity (PPP).
Under this policy, every 100 days, manufacturers in critical sectors that seek to engage in greenfield projects, or in expanding their existing facilities will have access to cheaper forms of credit at single digit rates as well as foreign exchange to procure plants and machinery.
The ultimate goal is to reverse the nation’s reliance on imports by creating an economic system that targets and supports the right companies and projects.
The CBN Governor, Mr Godwin Emefiele, said that the policy was designed to support Federal Government‘s drive towards boosting productivity and economic diversification.
Emefiele said that a maximum loan of five billion naira per obligor would be approved under the initiative, adding that any amount above five billion naira would require special approval of its management.
“The initiative will create the flow of finance and investments to enterprises with potential to kick-start sustainable economic growth trajectory, accelerate structural transformation, promote diversification, and improve productivity.
“It is a support to private sector companies with the aim of reducing certain imports, increasing non-oil exports and to improve the FX-generating capacity of the economy,” he said.
Emefiele said that 100 eligible companies in priority sectors would be selected to receive funding from the apex bank every 100 days, adding that the initiative would stimulate productivity in agriculture, healthcare, manufacturing, logistics, services, trade-related infrastructure and renewable energy.
“The specific objectives include: catalyse import substitution of targeted commodities; increase local production and productivity; increase non-oil exports; and improve foreign exchange earning capacity of the economy,” he said.
He explained that a comprehensive, regular monitoring of specific benchmarks and Key Performance Indicators (KPIs) under the initiative would be undertaken regularly.
“The KPIs shall include increase in production output of financed companies; percentage increase in capacity utilisation and percentage increase in export volume and value,” he said.
According to him, the projects will produce close to 125.8 billion dollars in foreign exchange and more than 20,000 direct and indirect jobs across all sectors of the economy. Already, CBN has given out N23.2 billion in loans to 28 beneficiaries, under “100 for 100” initiative.
The beneficiaries cut across sectors, including manufacturing, agribusiness and agro-processing and extractive industries, petro-chemicals and renewables, healthcare and pharmaceuticals, logistics services.
The apex bank said that 28 companies were found eligible and selected for funding in the first instance, with projects valued at N23.2 billion.
In supporting the initiative, the Minister of Labour and Productivity, Dr Chris Ngige, said recently it is a proof of the CBN’s commitment to spearheading initiatives that would spur productivity and economic growth in Nigeria.
“Productivity forms the basis for everything we are doing. To come up with such an initiative that benefits all key sectors means that the CBN has keyed into the fact that we need to produce,” he said.
The Secretary to the Government of the Federation, Mr Boss Mustapha, advanced that the policy has coming at the time that economic diversification and local production of finished goods and services is needed.
“Over the years, the CBN has shown the capacity in modeling and pushing through programmes and initiatives that will facilitate the realisation of its core mandates of ensuring financial system stability and promotion of economic policies and strategies, ” he said.
The initiative has also attracted support from a member of House of Representatives who has commended the apex bank for introducing the policy.
Rep. Chris Azubogu, while moving a motion in February, urged the CBN to sustain the policy, saying that it will improve Nigeria’s capacity to produce goods for its population and the markets in Sub Saharan Africa.
According to him, the policy will support economic development and contribute to increase in economic activities by stimulating the production of goods and services and creating employment for the teeming population.
“The policy will improve the capacity of Nigeria to produce goods for its population and Sub Saharan Africa market especially, as well as protect the country from being a dumping ground for substandard products.
“The initiative, if well implemented, will contribute immensely to Industrialisation, increase capacity to create employment for the teeming youth.
“It will also improve revenues through exports and reduced importation of goods, thereby improving the economy of the country,” he said.
A financial expert, Mr Okechukwu Unegbu, commended the apex bank for thinking outside the box in its efforts to fix the nation’s economy and urged beneficiaries to ensure that the funds were judiciously utilized.
“The CBN has made commendable efforts to encourage the manufacturing sector and economic diversification in recent times, and this policy is another one.
“The realisation by fiscal and monetary authorities, that it is imperative to move the country away from dependence on crude oil to the productive and manufacturing sector is encouraging.
“I urge beneficiaries of this policy to ensure that the funds are used for the purpose for which they were allocated, while the CBN should ensure strict oversight and monitoring to ensure compliance,’’ he was recently quoted as saying.
Given the poor performance of similar interventions in the past, some experts called for caution in celebrating the latest move.
Mr Ibrahim Aliu, a chartered accountant, advised the apex bank to take stock of its previous economic policy decisions to determine with a view to improving on the execution of the present one.
According to Aliu, in a chat with pressmen , said it is not just enough to introduce these policies, saying that their implementation of such policies must instill confidence and credibility in the system.
“The apex bank needs to take stock, do an appraisal, to determine the level of success of existing policies,’’ he said.
An economist, Mr Joseph Adebayo, in another interview called for effective monitoring of beneficiaries of the policy to ensure that the funds were not diverted.
“Many Nigerians believe that government money is free money. I hope the CBN has adequate modalities to monitor the 28 enterprises that have so far benefited from this policy and their usage of the N23.2 billion loan,’’ he said.
Though CBN is confident about the success of the policy amidst concerns about the implement it is obvious that the nation’s economy can no longer afford to lean on crude oil exports. The new policy therefore deserves the support of all stakeholders.
