Nigeria: CBN As Pivot of Buhari’s Economic Diversification Policy

Jackson Ugbechie appraises the pre and post Covid-19 pandemic interventions of the Central Bank of Nigeria under Godwin Emefiele and concludes that the cup is half full, not half empty, for President Buhari’s economic diversification drive

Recently, while playing host to the Director-General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala at the headquarters of Central Bank of Nigeria (CBN), Godwin Emefiele, the CBN Governor outlined the efforts of the apex bank to fix the deficiencies in the nation’s economy.

From the 1980s till 2015, Nigeria has operated a mono-product economy, relying solely on sales from crude oil production. Not even warnings from economists and financial experts persuaded successive Nigerian governments to diversify the economy, promote robust primary sector, boost agriculture and invest in infrastructure and innovation.

The governments simply shared the money as they came in. This consumption philosophy as opposed to production-inspired economic management became the model for successive governments such that many farmers left their hoes and tractors and migrated to Lagos and Abuja to chase petrochemical-related contracts; became importers of all manner of products including agricultural produce that could easily be produced in the country. Some ended up as forex traders, fixers and launderers.

Fortunately, the price of crude oil, the only significant Nigeria export, remained high within the intervening years. The bubble, however, burst in 2015 when crude oil prices crashed globally in a manner that shattered most national economies including the economies of advanced nations.

Emefiele had been appointed CBN Governor in 2014 by the PDP government of Goodluck Jonathan. In reality, he came at the time of scarcity. Barely one year after his appointment, oil price tumbled to an all-time low, hitting as low as $20 per barrel. To make matters worse for the incoming Muhammadu Buhari government, the previous PDP government spared no kobo. They shared all the money including cash in the excess crude account. By 2015 even before the inauguration of the Buhari government, Nigeria was already broke.

This is the context Nigerians should appreciate the efforts of Emefiele and the CBN at taking some hard decisions to keep the economy afloat and weather through the headwinds. Nobody saw it coming in the monstrously excruciating manner it did, but the global economic spiral of 2015 dealt a heavy blow on major economies across the globe. Nigeria, a monolithic economy primed on crude oil price was hard hit. Some countries are yet to recover from that historical oil price dip. Venezuela is a case in point. Nigeria economy could have gone the same way but for Emefiele’s interventions and innovative paradigm shifts which re-directed the national economy from consumerism to productivity with special focus on boosting local production and discouraging importation of those items that the nation can produce.

The over 30 interventions of CBN marked a turning point in the nation’s quest for genuine economic diversification.

According to Emefiele, the interventions, “particularly in the manufacturing and the agriculture sectors, significantly helped to encourage continuous improvements in growth in these two key sectors of our economy.

“Today, our food production systems have become more sustainable due to the improved output at our farms and local factories. Output of staple commodities such as rice, maize, palm oil and tomatoes have grown significantly, and we have also seen increased efforts of our local manufacturing firms to engage in backward integration efforts.

“Second, a visit to any major retail chain will reveal an increasing number of high quality made in Nigeria products relative to imported goods, which is helping to increase domestic production, generate employment and wealth in our country. If these intervention efforts were not carried out by the monetary and fiscal authorities, our economy would have been in a grim state,” Emefiele said at a CIBN dinner in November last year.

One audacious step taken by Emefiele to promote and boost local manufacture was the 2015 listing of over 40 items as ‘not valid for forex.’

The items included rice, cement, margarine, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables and processed vegetable products as well as poultry (chicken, eggs, turkey), private airplanes/jets, Indian incense, tinned fish in sauce (Geisha)/sardines), cold rolled steel sheets, galvanized steel sheets, roofing sheets, wheelbarrows, head pans, metal boxes and containers enamelware, steel drums, steel pipes and wire rods (deformed and not deformed).

The rest are iron rods and reinforcing bars, wire mesh, steel nails, security and razor wire, wood particle boards and panels, wood fibre boards and panels, plywood boards and panels, wooden doors, furniture, toothpicks, glass and glassware, kitchen utensils, tableware, tiles (vitrified and ceramic), textiles, woven fabrics, clothes, plastic and rubber products, cellophane wrappers, soap and cosmetics, and tomatoes/tomato pastes.

A scrutiny of the items showed that all of them, without exception, can be produced in Nigeria, from steel to rice and maize. Therefore, it is in the interest of the nation that the items are not funded from the depleting forex reserve of CBN. Whereas the apex bank did not impose a blanket ban on the over 40 items, the policy allows importers and business people to source their forex outside the CBN window.

It was a masterstroke aside being a tough call to make. It made Emefiele very unpopular among different strata of economic saboteurs, especially those who had made the CBN their forex ATM for the importation of all sorts of commodities in addition to money laundering. Some simply procure forex at official CBN rate and sell same at incredibly high rate at the parallel market. Emefiele’s policy was bad market for the forex grifters and import merchants who would prefer the local industries to die just so they can continue, unchallenged, in their illegal forex business and import racketeering.

But the ‘zero forex funding’ ban placed on the over 40 items had a rainbow side. In a manner that stands it out as the most innovative strategy at economic diversification since the 1980s when Nigerian governments at various cycles began to pay lip service to the mantra of economic diversification, the policy triggered a revolutionary shift from importation to local production. Many local industries, once comatose, sprang back to life.

Examples abound of indigenous companies that racked up production and became more profitable on account of the policy. One of them is Baton Nigeria, an Ogun state-based toothpick manufacturing firm. It commenced operation in August 2016 barely one year after the policy became effective and all too soon, became a major employer of labour and was able to increase production throughput in no time as there was patronage from the local market.

The not valid-for-forex policy aside helping to conserve as well as increase the nation’s external reserve also encouraged local grains production especially with the concomitant launch of an ambitious Anchor Borrowers’ Programme (ABP) which gave a huge push to local production and processing of grains and other agricultural produce.

Since the launch of the ABP in 2015 by President Buhari, over 4.8 million smallholder farmers across Nigeria have benefited and this has helped to boost local production of 23 agricultural commodities.

Earlier this year, while unveiling stacked paddy rice pyramids produced by rice farmers under the ABP initiative across the country in Abuja, the President gushed at the success of the programme, ascribing the huge jump in rice production in the last six years to the effectiveness of the ABP initiative.

“The Anchor Borrowers Programme has so far supported over 4.8 million smallholder farmers across Nigeria for the production of 23 agricultural commodities, including maize, rice, oil palm, cocoa, cotton, cassava, tomato, and livestock. Today, rice production in Nigeria has increased to over 7.5 million metric tonnes annually,” an elated Mr Buhari said.

The gain is not only in the volume of grains produced but also in the vastly improved quality of these grains. Prior to the launch of ABP, locally produced rice was largely poorly processed with heavy presence of impurities especially stones. The ABP helped to improve quality of rice and other grains by encouraging the sprouting of processing plants at the different major hubs of rice production. Kebbi state, famed for grains production, became the hub of rice-growing and processing with other active players in the value chain

Since the launch of the ABP, rice importation has dropped significantly, thus saving the nation billions of dollars in forex. By end of 2021, rice import bill had dropped from $1 billion to $18.5 million annually.

The ABP also ensured a sharp decline in the nation’s major food import bill from $2.23 billion in 2014 to US$0.59 billion by the end of 2018. The trend continued in the following years.

Emefiele’s approach is simple: target economic growth mostly in the agricultural, services, infrastructure, power and health care sectors of the economy. The CBN also initiated and revved up the agribusiness/small and medium enterprise investment scheme, the non-oil export stimulation facility, and the targeted credit facilities operated across the 774 Local Governments.

Other growth strategies and initiatives include:

– In the manufacturing sector the CBN – BOI (Bank of Industry) N200 billion facility financed the establishment and operations of 60 new industrial hubs across the country, creating an estimated 890,000 direct and indirect jobs.

– The CBN’s N50 billion textile sector intervention facility increased capacity utilisation of ginneries from 30% to nearly 90%.

On account of these steps, Nigeria’s Gross Domestic Production (GDP) sustained a six-month positive growth to record a 3.11 per cent in the first quarter of 2022 at a time some advanced economies, including the United States, are said to be slipping into recession.

The latest NBS report says Nigerian economy has maintained a positive trend for the sixth consecutive quarter after the economic shock by the COVID-19 pandemic. This is something to cheer and it’s all down to the fighting spirit of an unflinching Emefiele.

ยท , Ugbechie public policy analyst, writes from Abuja.


“Emefiele’s approach is simple: target economic growth mostly in the agricultural, services, infrastructure, power and health care sectors of the economy”


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