Speaking at The Guardian newspaper’s presentation of Special Report on Financing the Economy held in Lagos, he said the fund will be given to manufacturers at a single digit interest rate of nine per cent.
The CBN boss said the strategic initiative targets projects in manufacturing and agriculture, given the mutual interdependence of both sectors for the complete industrialisation of agro-allied business.
He said the CBN’s development finance strategy was aimed at diversifying the economy away from over- dependence on oil revenues and consistent with its development agenda.
The CBN chief explained that globally, a well-functioning financial system is key for economic growth and development.
He said that the level of credit in the domestic economy channelled to productive private sector is critically below the levels required to place our economy on the path of balanced, sustainable, and inclusive growths. “Given the indispensability of finance, the entire international community — including the United Nations member states, multilateral institutions, civil society groups, and the private sector — have adopted the contemporary concept of financing for development to update the mechanisms and tools of financial flows in order to fund initiatives for economic growth and development,” he said.
He explained that emphasis on financing economic growth and development is distinctively placed on inclusiveness, accessibility, human capital and factor productivity. “In most cases, private funding in the form of bank credit is often considered an important determinant of the level of productive investment in an economy. Like many other emerging and developing countries, Nigeria has got its own peculiarities in the area of financing the economy. In addition to these peculiarities, the sheer size of our economy makes it impossible for neither the public sector nor the private sector to independently satisfy the financing requirements of the economy; hence, the need for an effective public private partnership and for each to play its individual roles,” he said.
The CBN boss said the aspect of private sector finance as seen by the majority of Nigerians is basically concerned with credit from the banks for enterprise and investment purposes. “ In recognition of the importance of financing for economic growth and given its understanding of the implication of risk management in credit allocation, the Central Bank of Nigeria adopted a two prong approach to resolve the insufficient credit flow to the private sector and concomitantly accomplish its development finance function,” he said.
According to him, the first of the two approaches include a de- risking of bank lending to the private sector through a wide-range of credit guarantee schemes undertaken by the bank. The second involves direct intervention initiatives in key high impact sectors including agriculture, Micro Small and Medium Enterprises, manufacturing, power, among others.
Both approaches, which effectively reflect public private partnerships in financing economic growth, are designed to ensure the constant flow of credit to vital sectors of the Nigerian economy.
Emefiele said the vulnerability of the Nigerian economy to global shocks simply reflected the fact that it was unable to sufficiently produce what it consumes, hence, the unwarranted dependence on foreign goods.
He said the dependence on oil sector to provide the foreign exchange needed to finance our imports. Related to this is the poor diversification of the economy and low factor productivity in key non-oil sector. There is the issue of an ostentatious and elitist taste for imported goods in Nigeria. But, perhaps the most important of these factors is the inadequate finance to strategic high impact and high employment multiplier sectors.
He also said that the power—Industrialization will not be feasible if the power challenges are not fixed. Hence, in conjunction with stakeholders in the power sector, the CBN established a Special Purpose Vehicle, in the form of a low interest facility, to discharge existing legacy gas debts that had undermined gas supply to generating power plants in the country. This fund, which has about N213 billion, is aimed at improving investment and production in the power value chain.
Emefiele said the economy has seen stabilisation and convergence of the exchange rate around N360/ $1 from about N525/$1 in February 2017. Increased forex supply with over $20 billion inflow to the Investors & Exporters window since inception in April 2017.
There has also been strong recovery of external reserves from just over $23 billion in October 2016 to over $46.7 billion as of March 29, 2018. Improvements in the capital market metrics.