• Advises CBN to review strategy, synergize, to make naira exchange rate reflect market reality
BACKGROUND
Against the viral media reports of a section of the media interpreting the position of Nigeria’s Vice President, Prof Yemi Osinbajo, SAN, on his recommendations to the Central Bank of Nigeria (CBN), on FOREX, as calling for devaluation of Naira, The Daily Leaks, in this piece aims at putting the record straight on what the VP said, as he delivered his address at the commencement of a two-day Mid-Term Ministerial Performance Review retreat, presided over by President Muhammadu Buhari, at the Banquet Hall, Presidential Villa, Abuja, Monday afternoon.
WHAT VP OSINBAJO SAID ON CBN/FOREX
The Vice President, President Yemi Osinbajo, delivering his progress report on the Economic Sustainability Plan (ESP) implementation, at Mid-Term Ministerial Performance Review retreat, unambiguously urged the Central Bank of Nigeria (CBN), to review its foreign exchange management strategy and ensure that the naira’s valuation reflects market reality.
Speaking at the commencement of a two-day Mid-Term Ministerial Performance Review retreat, presided over by President Muhammadu Buhari, at the Banquet Hall, Presidential Villa, Abuja, Monday afternoon, Prof Osinbajo said there is need for CBN to rethink its demand management policy, which it has used to restrict imports in an attempt to manage pressure on the currency.
“I think we need to move our rates to be as reflective of the market as possible. This is the only way to improve supply (of dollars),” the Vice President said.
Osinbajo, who noted that, currently, the naira is changing at N411 to $1 US dollar at the official side of the market, while the same goes for about N565 at the parallel market, said, “We can’t get new dollars into the system, where the exchange rate is artificially low.”
He also called on the CBN to synergize on fiscal, monetary policies between relevant government ministries and officials rather than deterring investors from bringing foreign exchange into the country.
“As for the exchange rate, I think we need to move our rates to be as reflective of the market as possible. This, in my own respectful view, is the only way to improve supply.
“We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is my view.
“There must be synergy between the fiscal and the monetary authority. We must be able to deal with the synergy, we must handle the synergy between the monetary authority, the CBN, and the fiscal side.
“Sometimes, it appears that there is competition… If you look at some of the interventions, you will find that those interventions are interventions that should be managed by ministries.
HOW THE STRATEGY AND SYNERGY WILL WORK
The Vice President said: “The Ministry of Industry, Trade and Investment should handle MSMEs interventions, and we should know what the CBN is doing. In other words, if the CBN is intervening in the MSME sector, it should be with the full cooperation and consent of the ministry of industry.
“Sometimes you will get people who are benefiting more than once because we simply have no line of sight on what is going on, on one side.”
ONE CLEAR ECONOMIC PLAN NEEDED, NOT TWO
The Vice President advised that there should be one clear economic plan, not two, saying “we cannot have a CBN led economic plan and a government led plan. We would end up duplicating, and even there may be beneficiaries of grants benefiting multiple times.”
SAME STRATEGY WORKED UNDER HIM IN 2017 AS ACTING PRESIDENT, STABILISING DOLLAR TO N450 FROM N525
Recalled that four years ago as Vice President Osinbajo assumed office as the Acting President, February 2017 holding brief for President Muhammadu Buhari who was away in the United Kingdom on medical reasons, Naira before and during this period exchanged for N510 to the $1 (US Dollar) at the parallel market, while CBN official rate remains at N305.50 to the $1 (US Dollar).
Then, at the National Economic Council (NEC) meeting presided over by the Acting President, the NEC expressed concerns over the exchange rate and directed the CBN to quickly facilitate an urgent review of the current forex policy in the country.
That NEC meeting which was said to have lasted for over five hours, was also said to have in attendance the 36 state governors and other members of NEC, which included the Attorney General of the Federation and Minister of Justice, Secretary to the Government of the Federation (SGF), Head of Service of the Federation (HoSF) and other top government functionaries.
NAIRA BECAME STABILISED UNDER 24 HOURS
Following the Acting President’s directive, the dollar came crashing, 24 hours after the CBN, immediately swung into action and released $500 million to the banks, stabilising at 450 from N525. That was the immediate effect the presidential directive had on the economy four years ago, and if it won’t be misconstrued, that was the same thing the VP said should be done by the CBN, that is, to review its foreign exchange policy that weakened the national currency.
ON CUSHIONING THE COVID-19 EFFECT WITH ESP
The Vice President spoke on how the Federal Government rescued the economy from the Covid-19 devastation, he said despite the challenges of funding and other issues, the implementation of the N2.3 trillion Economic Sustainability Plan (ESP), has made significant impact across different sectors.
ALSO READ: ESP aimed at mitigating macroeconomic shocks — Osinbajo
Prof Osinbajo said it has helped the country to effectively tackle the fallout of the COVID-19 pandemic, by creating jobs and safeguarding existing ones, while also putting the economy on the path of sustainable growth, while he expressed concerns over the slow pace movement from the structured lending financing source of the ESP, which has suffered significant delays so far.
However, at speaking further on the progress made towards the achievement of the nine key priorities of the Buhari administration, Prof. Osinbajo stated that, “the ESP tried to mitigate the shock of COVID-19, but also took the opportunity to try to tackle longstanding structural challenges, while repositioning the economy for the future.”
BACKGROUND TO IMPLEMENTATION WORKS ON ESP
Prof Osinbajo explained that following the global pandemic, “there were sharp declines in some key sectors: Transportation sector declined by 49%, Hospitality sector fell 40%, the Education sector fell 24%, Real Estate declined by 22%, Trade by declined by 17% and Construction declined by 40%.
But since the ESP implementation began, which was credited as a major reason why Nigeria exited recession faster than predicted, data showed that these sectors have rebounded to positive growth:
“Transportation to 77%, Hospitality to 2%, Education to 1%, Real Estate to 4%, Trade to 23%, and Construction to 4%.”
Speaking further, the Vice President noted that, “in response (to the pandemic), the President took two actions. The first was to set up a small inter-ministerial Committee headed by the Minister of Finance to quickly examine the implications of and the immediate mitigation steps that would be taken for the economic shocks we were experiencing. The second step which Mr. President took was to ask that we draw up a full Economic Sustainability Plan to provide at least a 12-month response to the fallout of the pandemic. And Mr. President asked me to chair the Committee to draw up the plan and later to implement it.
“We were clear – and this was Mr. President’s position – that the only way of avoiding an economic disaster that could last for years was for government to essentially put forward a major fiscal stimulus plan; with clear objectives of saving jobs, creating new ones, supporting businesses that may close down, and employees that may not be paid during lockdowns, and, of course, healthcare support to reduce the COVID-19 caseload.”
ESP OBJECTIVES
The VP continued, “the first objective of the ESP was Improved Healthcare and lowering the COVID-19 caseload, the second was Restoring Growth; the third – job creation and safeguarding existing jobs; the fourth – Increased Local Production, and part of that was what we called the Guaranteed Offtake Scheme; the fifth was Reducing Social Vulnerabilities; and that essentially was looking at how to improve the quality and effectiveness of the Social Investment Programmes and the scope of the programme.”
ESP COMPONENTS
Since the implementation of different components of the Plan, including the MSMEs Survival Fund, Social Housing Scheme, and Solar Home System, among others, the ESP has recorded significant progress in achieving its objectives.
ESP MSMES SURVIVAL FUND SUPPORTED 1.1 MILLION NIGERIANS AND BUSINESSES
For instance, Prof. Osinbajo noted that the ESP MSMEs Survival Fund, which was designed to create jobs and safeguard existing ones, has supported 1.1 million Nigerians and businesses nationwide.
The Survival Fund has different schemes, namely: the Guaranteed off-take Scheme, Payroll Support Scheme, Artisans and Transport Support Scheme, General MSME Grant Scheme and Formalization Support Scheme.
ACHIEVEMENTS OF PAYROLL SUPPORT
The Vice President said that under the Payroll support, “direct grants were given for a three-month period to 459,000 beneficiaries across the country, who received a total of N90,000 and N150,000 (N30,000 and N50,000 respectively per month) in salaries for the three-month period.
“Then, 293,000 transport workers and artisans received one-off grants of N30,000 each. While 82,000 businesses also received one-off grants under the MSME General grant scheme; and about 255,000 enterprises benefited from the CAC free registration of companies under the Formalization Support Scheme.”
6.39M FARMERS ENUMERATED UNDER ESP
Similarly, under the ESP Agriculture for Food and Jobs Plan, the Vice President noted that 6.39 million farmers have been enumerated so far and these farmers were geotagged to their land.
Prof Osinbajo said, “so far, 3.63 million passed the first stage of validation and another 2.47 million passed the second stage of validation. We’re validating them also for BVNs.
“Also, 320 hectares of land has been cleared across 8 states at 40 hectares per state. The States are Kwara, Plateau, Cross River, Edo, Kaduna, Ekiti, Osun, and Ogun. These are States that require land clearing. Of course, many States do not require land clearing, and we simply supported those states directly. ₦ 471bn is allocated as loans to farmers across 14 Crop Value Chains, Beef Production, Aquaculture and Poultry Farming.”
N5.1BILLION WAS PAID TO OVER ONE MILLION FARMERS
The Vice President further said that “a subsidy of N5.1billion was paid to over one million farmers under the Fertilizer Subsidy Programme, which is a critical part of the Food for Jobs programme.
“Mr. President approved a programme of giving subsidies to farmers for bags of fertilisers to each farmer depending on the size of the farm. But the strategy here was to give the farmer the amount of the subsidy directly in cash paid to their BVN verified account. Mr. President approved the immediate disbursement of the Fertilizer Subsidy Fund to smallholder, vulnerable farmers in the country,” he added.
He also mentioned the ESP Public Works and Aviation component, saying “construction work is ongoing on 193 road sections totalling 3,707km of roads; with 26,021 Nigerians employed in rehabilitation/construction of these roads so far. The construction of 345km of rural roads, 205 bore holes and 10 treatment plants to create jobs and develop rural areas in 36 States and the FCT has commenced.”
PROGRESS MADE ON SOCIAL HOUSING PROGRAMME
In the same vein, Prof. Osinbajo said the ESP Social Housing Programme has helped to create thousands of jobs and boost the local building materials industry in the country.
Noting that so far about 1,151.689 hectares of land has been made ready for development, the VP said, “the target is to build 300,000 houses. This has the capacity to accommodate a further 34,550 homes. The Programme is being funded by a mix of resources, including Financing from the Federal Ministry of Finance, and a loan from the Central Bank under the ESP.
“Buyers have a window of at least 15 years to pay for their homes. The design is to build two-bedroom homes costing not more than N2 million – N3.75m for a three-room unit, and N4.25 for a four-room unit.
“At the moment, 4,700 homes have been approved in 7 States for financing for commencement in October. 5,400 are scheduled for November 2021.”
But the VP observed that “progress has been much slower than envisaged. There are continuing delays in the disbursement of funds from the CBN. The Debenture agreement for the sum of N200B with the CBN which represents the bulk of the financing was agreed in April and has been signed by all.”
CREATING ASSESS TO ELECTRICITY FOR 5 MILLION HOUSEHOLDS WITH SOLAR POWER
The Vice President had the same observations on the delays in the Solar Power Naija, the ESP Solar Electrification Programme, which is also designed to create jobs and develop a local solar industry and provide access to electricity to 5 million households in off-grid, under-served communities through new solar connections. This would bring energy access to 25 million Nigerians.
“It will include the assembly or manufacturing of components of off-grid solutions to facilitate growth of the local manufacturing industry, while the use of local content will be encouraged. It will create in all 250,000 new jobs in the energy sector,” the Vice President stated.
But the 5m Solar Connections target is being delayed because while N140B was allocated through the CBN to facilitate it, only N7B of that has been disbursed.
Explaining some key challenges of the implementation of the programme, the VP listed unwillingness of CBN to disburse funds, and the risk aversion of Public and private financial institutions, particularly for Power projects.
Funding delays were also noted on the Agric plan of the ESP.
Prof. Osinbajo disclosed that only N14B of the N471B as loans to farmers across 14 crop value chains have been disbursed to commercial banks. Even then, that amount is yet to be utilised by farmers due to late release for the 2021 wet farming season.
OSINBAJO LAUDED PRESIDENT BUHARI’S STEADY LEADERSHIP
On how Nigeria survived the economic challenge of 2020, Prof. Osinbajo praised President Buhari, saying, he deserves the credit for providing steady leadership through the crisis.
“Let me say on the whole, that we have been able to weather the storm of a very serious economic challenge.”
“I think that is largely due to the steady and stable leadership we received from the President. I think if Mr. President had panicked in that period, we would have had a lot of difficulties, perhaps we would be in a much worse situation.
“He deserves the commendation for providing that steady hand when that was required,” Osinbajo said.
In June 2020, in response to the fallout of the pandemic, President Buhari mandated the Vice President as chair of the Economic Sustainability Committee, to coordinate the implementation of the ESP aimed at cushioning the economic effects of the COVID-19 pandemic.
