Emefiele: Worsening Insecurity Limiting Successes in Agric Interventions

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*CBN releases $80m weekly to meet forex demand
*Retains MPR at 11.5%, LCCI hails decision

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin
Emefiele, yesterday expressed concerns that the worsening
insecurity in the country, particularly in food-producing areas is
limiting expected outcomes and further fuelling food inflation.

He added that as part of measures to address forex challenges,
the apex bank disburses not less than $80 million weekly to banks
either for personal travels (PTAs) or business travels or payment
of school fees.

He spoke in Abuja at the end of the two-day meeting of the
Monetary Policy Committee (MPC), which resolved to leave all
monetary policy parameters unchanged.

The MPC retained the Monetary Policy Rate (MPR), otherwise known
as interest rate, at 11.5 per cent.

The Lagos Chamber of Commerce and Industry (LCCI) hailed the
bank’s decision to retain the 11.5 per cent interest rate.

Inflation, which increased for 18 consecutive months, stood at
17.33 per cent in February.

Emefiele, while reading the communiqué after the MPC meeting,
stated that the rise in inflation has continued to be attributed to
the increase in both the food and core components of inflation,
which rose to 21.79 per cent and 12.38 per cent in February,
respectively, from 20.57 per cent and 11.85 per cent in
January.

He said: “This persisting uptick in food inflation, however, was
the major driving factor to the uptick in headline inflation.

“This was due to the worsening security situation in many parts
of the country, particularly, the food-producing areas, where
farmers face frequent attacks by herdsmen and bandits in their
farms”.

He said while the apex bank was intervening in the agricultural
sector, the rising insecurity in some food-producing areas had
limited the expected outcomes in terms of supply to the market,
thereby contributing to the rise in food prices.

He added that contrary to reports, Nigeria has not altered its
foreign exchange management policy. The clarification came against
the backdrop of recent media reports that the CBN had adopted a
flexible forex regime.

But Emefiele insisted that the country has not changed from its
foreign exchange management policy of managed floating.

He said: “Nigeria still remains on a managed float. What does a
managed float regime mean? That the CBN, being the institution that
has a core mandate for foreign exchange management in the country,
we will run the market, see how the market operates, depending on
its reading of how the exchange rate moves in the market, we will
come from time to time to intervene in the foreign exchange
market.”

The CBN has resolved to leave the interest rate at 11.5 per cent
with the asymmetric corridor of +100/-700 basis points around the
MPR.

Emefiele said the decision to hold the rates at their current
levels, despite rising inflation, followed the need to consolidate
on growth, given that the economy had just crawled out of
recession.

He said conscious of the persisting inflationary pressure
fuelled largely by a continued uptick in food prices, the MPC noted
the CBN’s interventions to boost food production, particularly
through its various agricultural programmes among other
complementary measures, including an increase in disbursement for
the dry season agricultural programme to increase output among
others.

In arriving at its decisions to hold rates, Emefiele said the
MPC was confronted with a dilemma on whether to continue to focus
on efforts to stimulate outputs or whether to focus on reining in
inflation. He added that the committee was also worried that the
level of unemployment must be addressed swiftly to moderate the
restiveness among the populace.

According to him, members believed that given that the exit from
recession is fragile, any decision to tighten or rein-in inflation
may reverse the fragile recovery and plunge the economy back into
recession.

However, he said, the consensus among MPC members was that given
that inflation is substantially a supply-side phenomenon, there is
a need to continue to focus on consolidation of the recovery
process by taking actions that continue to stimulate output growth,
create employment but at the same time have an eye on the effort to
moderate the inflationary pressure, using the current
administrative measures being adopted by the bank in controlling
monetary aggregates in the banking system.

He said with consideration of whether to tighten, hold or
loosen, therefore, the committee felt that with inflation at a
three-year high and price stability being the bank’s core mandate,
a contractionary policy stance might be required to tame the rising
trend.

But he said MPC members felt that tightening monetary policy
would hike the cost of capital and hamper investments required to
create employment and to boost economic recovery.

He added that the committee noted the moderate recovery in
output growth in the fourth quarter of 2020, associated mainly to
the positive impacts of the several monetary and fiscal measures
implemented to reflate the economy, following the negative
consequences of the COVID-19 pandemic.

Also, reacting to reports of the scarcity of forex in deposit
money banks to meet school fees obligations, the CBN governor
called on Nigerians not to panic, assuring them that all “foreign
currency obligations will be met.”

He said the apex bank disbursed not less than $80 million to the
banks weekly either for personal travels (PTAs) or business travels
or payment of school fees.

According to him, the CBN is making efforts to decide on how to
create a complaints desk for people to report their inability to
access forex for school fees payment from banks.

Emefiele said: “I repeat, there is no need for anybody to panic.
Luckily we have exited recession; so, that’s one positive. Two,
crude prices are moving up; three, we are aggressively focusing on
Diaspora remittances; four, we are looking to how to encourage
foreign investors into the country.

“So we are very optimistic that there’s enough and there will
continue to be enough foreign exchange for people to meet their
obligations. We just need people to be patient.

“And I am also saying so again that if you have any foreign
currency obligation, your obligations will be met. There’s no need
for everybody to rush to the door at the same time, creating panic
and giving speculators the opportunity to reap us off.”

On concerns that the prices of food items, particularly rice,
have continued to increase despite a bountiful harvest, the CBN
governor said the prices had reduced compared to the period of
scarcity caused by the COVID-19 pandemic.

MPC said while vaccination against COVID-19 had gained
significant grounds in major advanced economies, some emerging
market and developing economies were yet to commence
vaccination.

Emefiele expressed concern that the global disparity in
vaccination could impair recovery to global growth, as barriers to
trade and the global supply chain, could remain in place much
longer than anticipated to prevent re-infection in countries that
have achieved significant vaccination and herd immunity.

Emefiele said the committee noted the disbursement of N107.60
billion to 548,109 farmers cultivating 703,619 hectares of land
between Q4 2020 and Q1 2021 to boost dry season output in support
of agricultural value chain development.

According to him, total disbursements as of February 2021
amounted to N1.487 trillion under the various agricultural
programmes, of which N686.59 billion was disbursed under the
Commercial Agricultural Credit Scheme (CACS) and N601.75 billion
under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers to
support food supply and dampen inflationary pressures. He added
that under the Targeted Credit Facility, the apex bank disbursed
N218.16 billion to 475,376 beneficiaries, of which 34 per cent of
them are SMEs.

Under AGSMEIS, N111.62 billion was disbursed to 28,961
beneficiaries, 70 per cent of which are in the agricultural
sector.

The CBN governor stated that under the Creative Industry
Financing Initiatives mainly targeted at youths, N3.19 billion has
been disbursed to 341 beneficiaries, of which 53 per cent is to the
movie industry.

He said: “Under the National Mass Metering Programme, N33.45
billion has been disbursed to nine distribution companies for the
procurement of 605,852 meters, while N89.89 billion has been
disbursed under the Nigeria Electricity Market Stabilisation
Facility (NEMSF 2) to 11 distribution companies to improve the
electricity supply industry in Nigeria.

“Under the N100 billion Health Care intervention Fund, the bank
has disbursed N94.34 billion, and is willing to expand the
facility, to 85 projects in the pharmaceutical industry, hospitals
and state governments for both brownfield and greenfield projects,
mostly to expand pharmaceutical drug lines, acquire MRI and other
equipment and upgrade laboratories and other hospital services,” he
stated.

He said under the N1 trillion manufacturing intervention
stimulus, a total of N803.36 billion had been disbursed to 228
projects across various sectors in agro-allied, mining, steel
production and packaging industries, amongst others.

“The monthly weighted average inter-bank call and Open Buy Back
(OBB) rates fell to 1.80 and 1.50 per cent in February 2021 from
3.50 and 2.30 per cent in January 2020, respectively, reflecting
the continued liquidity surfeit in the banking system,” he
added.

Meanwhile, the LCCI has described the monetary policy stance of
the CBN, which retained policy parameters during its March 2021
meeting as the most appropriate decision the bank could take at the
moment.

In a statement by the Director-General of the LCCI, Dr. Muda
Yusuf, LCCI said it “appreciates the dilemma which the current
stagflation condition presents to the monetary authorities. We note
the imperative of striking a balance between stimulating output
growth and curbing intensifying inflationary pressures.

“Considering recent macro developments in the economy, holding
policy stance seems to be the most appropriate decision at this
moment. The CBN’s governor stated at the briefing that the bank’s
current policy focus anchors on boosting output growth given the
fact that the domestic economy narrowly exited recession in the
fourth quarter of 2020.”

He said the LCCI believed that the sustained intervention
efforts of the apex bank would enhance credit flows to the real
economy, stimulate output growth and ultimately moderate
inflationary pressures.