James Emejo writes on the latest push by the Central Bank of Nigeria to strengthen the industrial sector, which has been struggling to find its feet in recent times
Recently, the CBN Governor, Mr. Godwin Emefiele, in matching words with action, formally inaugurated the much-anticipated funding initiative aimed at boosting the country’s industrial capacity by stimulating output production.
At the unveiling of the first cycle of the recently announced 100 for 100 Policy for Production and Productivity (PPP) initiative, the apex bank had presented cheques valued at N23.20 billion to 28 companies whose projects had been selected for funding.
Emefiele had last year introduced the policy under which eligible companies in priority sectors will be screened and 100 companies will be selected to receive funding from the CBN every 100 days, beginning from November 1, 2021.
The CBN governor, pointed out that the disbursements, which are loans that must be repaid by the beneficiaries, followed due screening of the applications received, adding that the projects, valued at N23.20 billion, comprise 14 in the manufacturing sector, 12 in the agricultural sector, and two in the healthcare sector.
Ailing industrial sector
It is evident that all is not well with the country’s industrial sector and all efforts by the fiscal authority to revive the sector had only been in theory and often politicised. With an unfavourable investment climate, which had sent major manufacturing firms exiting the country, no doubt the negative impact had been telling on the nation.
Once, an economic fortress, the real sector, until recently, is arguably a shadow of itself, plagued by sundry challenges, unable to contribute meaningfully to growth.
Before the advent of oil, the real sector, particularly the non-oil sector accounted for the bulk of the foreign exchange inflows into the economy, but with subsequent neglect by successive administrations, Nigeria’s manufacturing sector, including the non-oil exports are struggling in the face of stiff competition in the international market.
The lack of capacity for value addition, the incessant products’ rejection by foreign trading partners and absent of quality standards among others remained key obstacles.
Until recently, when the apex bank has had to intervene in critical sectors of the economy, funding had remained a huge challenge towards industrialisation.
Why CBN is bordered
Notably, the central bank’s interest in supporting the real sector could be derived from the fact that the failure of the sector could negatively impact on monetary policy administration.
Today, the foreign exchange crisis faced in the country had been directly linked to the weak domestic output traceable to a largely subdued manufacturing sector as well as a struggling non-oil export sector.
Analysts have stressed the fact that the local currency could only be strengthened by boosting local output and exports. But the country’s current trade scorecard had shown otherwise, as imports had continued to outweigh exports for decades, further putting the economy in precarious condition.
Essentially, the country would have to export products to earn foreign exchange rather than continue fritter scarce reserves on importation.
This is the reason why the apex bank’s resolve to fund manufacturing as well as strengthen the non-oil export sector to get it back on their feet is not only music to the ears but should be applauded.
New FX bidding regime
The CBN governor had further hinted that a new Foreign Exchange bidding regime would soon be introduced by the apex bank, adding that the new framework, which is currently being fine-tuned, will be market driven and would support companies that accord utmost priority for local production and job creation drive.
The CBN governor said though details of the propose FX policy was still being worked on, foreign exchange support will be solely allotted for the importation of spares, plants and equipment needed to increase production capacities of local companies.
Expanding on proposed FX policy, he said, “It is being worked on and I can tell. But what we are saying in essence is that you would find a situation where those who will benefit from foreign exchange or who would be accorded priority – everybody will benefit – but those who would be accorded priority in FX allocation will be those who will embrace our interventions that will help to grow the economy; intervention that will create jobs for our people, not just people who just want to import and export everything- anything they do is import.”
He said, “We want to see to it that you are conducting business activities that reduce our imports and reduces your level of import, reduces your reliance on raw materials imports. But rather, there would be plants, equipment, spares priority and also ensure that by the time you are in business, the level of import you need will be very minimal if not entirely zero.
“Those will be the kinds of companies we will accord priority in FX allocation going forward,” he said.
100 for 100 PPP scheme
According to Emefiele, the cardinal objective of the 100 for 100 PPP initiative was to ensure that priority is accorded to companies who display verifiable progress in the bank’s imports substitution and job creation drive.
However, he said for this first cycle of the 100 for 100 policy, 243 applications valued at N321.06 billion, spread over key sectors including agriculture, energy, healthcare, manufacturing, and services sectors were submitted on the portal.
Emefiele said after much engagement, 79 applications valued at N121.87 billion, were received by the central bank from banks, for projects in six sectors, namely agriculture, energy, healthcare, manufacturing, mining, and services sectors.
According to him, the requests were carefully screened and scrutinised against a set-out selection criteria, categorised into production efficiency and scalability; local content capacity; job creation and human capital development; operating sector relevance; and potential contribution to economic growth.
The CBN governor said only 28 companies with projects that have clearly articulated proposals were selected for funding, adding that the CBN intended to revisit the applications that were declined with a viewing to understanding areas of their shortcomings in order to further enable more companies to benefit from the noble initiative meant to stimulate manufacturing output in the country.
He pointed out that over the past seven years, the government under the visionary leadership Buhari had made significant efforts at reducing our economy’s over-reliance on imports for food and industrial raw materials, towards one that is self-sufficient and self-reliant, with strong commitment towards ensuring that Nigerians produce what they eat and eat what they produce.
The CBN governor added that in line with the administration’s policy focus to stimulate domestic production and productivity, the central bank had continued to introduce various policy measures, in the form of interventions, to stimulate low-cost and sustainable financing to priority sectors and segments of the economy.
He said, “The 100 for 100 Policy for Production and Productivity (PPP) is one of such interventions designed to fast track productive activities in priority sectors.
Under this programme, eligible applicants will be required to submit their applications to their banks, after which, a notification is submitted on a dedicated portal – https://100for100ppp.ng, which has been created to ensure transparency and allow applicants track the status of their applications.”
Emefiele also said that the 100 for 100 policy was designed to stimulate investments in Nigeria’s priority sectors with the core objective of boosting production and productivity, which will aid efforts to stimulate greater growth of our economy and create employment opportunities.
He said, “Under this initiative, every hundred 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 machineries.”
He said programme has the potential to significantly accelerate manufacturing output, promote further diversification of the economy and enable faster growth of our non-oil exports.
Essentially, he said the PPP would help to reduce the country’s over-reliance on imports, and stimulate productivity in agriculture, healthcare, manufacturing, extractive industries, logistics services, trade-related infrastructure, and renewable energy.
He said, “This launch also fulfills the commitment we made during the unveiling of the first central bank digital currency (CBDC), the eNaira, by His Excellency, President Muhammadu Buhari GCFR, on the 25th of October, 2021, when we announced that the CBN will introduce a 100 for 100 – Policy on Production and Productivity (PPP), under which eligible companies in priority sectors will be screened and 100 companies will be selected to receive funding from the CBN every 100 days, beginning from 1st November 2021.
“The selection of subsequent beneficiaries will be rolled over every 100 days with new sets of 100 companies and details of these companies will be published in the major national dailies.
“Today’s launch of the 100 for 100 Policy for Production and Productivity (PPP) initiative and cheque presentation to selected companies, is a culmination of our engagements with critical stakeholders in the manufacturing sector and financial institutions, as we have here today pioneer beneficiaries of the initiative and the participating financial institutions.”
