A NEW vista was on Wednesday opened in efforts to revive Nigeria’s manufacturing sector as the Central Bank of Nigeria (CBN), Bank of Industry (BoI) and commercial banks in Nigeria put pen to paper to execute a N500 billion deal to fund the power and manufacturing sectors, thereby marking a remarkable departure from words to action.
The deal, which was supervised by Vice President Namadi Sambo at a ceremony at the Presidential Villa, aims to revolutionise funding for the real sector and breathe life into the ailing industries.
The fund is to be disbursed to beneficiaries at a concessionary interest rate of not more than seven per cent and with a tenor of 10 to 15 years. It covers lending and re-financing of projects, restructuring of existing portfolios to manufacturers and support for investment in industrial clusters’ power supply.
The deal was signed just as the Governor of the CBN, Mallam Sanusi Lamido Sanusi yesterday briefed the Federal Executive Council (FEC) on the performance of the Nigerian economy in the second quarter of 2010, with the Council urging the CBN “to realign economic policies to the financial reforms” as a way of encouraging “credit flow into the real and strategic sectors of the economy.”
Vice President Sambo who was obviously overwhelmed by what he termed as “the creative intervention” by the CBN team said: “The sector has suffered immensely from infrastructural problems and access to credit, especially the manufacturing sector suffered. The manufacturing sector is critical to our Vision 20:2020 and Millennium Development Goals (MDGs)targets.
“This realisation obviously influenced the CBN in its latest efforts. This is a creative initiative to revive and improve access to credit to SMEs and improve liquidity for the participating banks. It will also create employment.
“It is a reprieve for those borrowing as it would enhance the liquidity of the banks. Our banks need to drive the economy and meet global competitiveness. The money is in two components. One part is N200 billion for small and medium enterprises, and the manufacturing sector. Already, approval has been granted for over 60 per cent of the fund. The second component is for funding for the power sector.
“This intervention is coming when government is initiating several other efforts to revive several sectors of the economy. For the first time, a government in this country is coming up with a total package to address the problems of the economy. I wish to praise the CBN management for driving the process. I am glad that the banks have also bought into the scheme. I hope that the banks would match the efforts of government within the stipulated time.”
Speaking earlier, the Central Bank Governor, Sanusi Lamido Sanusi stressed that the growth of the economy was dependent on the growth and resilience of the real sector.
He said: “Things must change. We believe that the banking industry can be the catalyst for the sector. Every bank that has participated in the N130 billion we disbursed is to contribute its own share by at least N65 billion. Beyond providing finance, we are providing advice and impact assessment to aid the growth of the manufacturing sector.
“What we are doing now is a key mandate of the CBN which has over the years been relegated to the background. We will henceforth ensure that the developmental roles of the CBN would be refocused. It is a new era for all of us. Our target is economic growth, poverty alleviation and wealth creation.”
On her part, the Managing Director of BoI, Evelyn Oputa, described the occasion as historic while the Manufacturers Association of Nigeria (MAN) urged the banks to change their attitude and embrace lending to the real sector. President of MAN, Bashir Borodo praised the CBN’s efforts, saying it is “the way to go.”
At its meeting with Sanusi, the FEC approved January 1, 2012 as the effective date for convergence of accounting standards in Nigeria with International Financial Standards (IFRS). It urged the CBN to shield the newly established Assets Management Company of Nigeria (AMCON) from the sharp practices and financial engineering of the past that have plunged global and natural economies into avoidable crisis.
Sanusi’s report to the Council explained that the nation’s economy is “on sustainable growth, especially the non-oil sectors led by agriculture, retail trade, services and construction.”
He added: “There had been steady growth in GDP moderation in inflation. Inter-bank rates and other money market rates including lending also moderated. The foreign exchange market was substantially stable, while the recovery in the capital market continued. However, the growth in monetary and private sector credit aggregates remained sluggish.”
He regretted that Nigeria has “an economy in which you do not have power. If you don’t have electricity, you cannot attract investors. You cannot improve production. We don’t have power because the reforms that ought to have been carried out in four years have not been done. We keep talking and talking and talking and we have not yet created the right environment. I am saying that we have got to have a regulator (especially in the power sector). We have got to have good input for gas pricing. It will encourage investment. Deregulate electricity prices. This N7 is a myth because nobody can get power at that price. Ghana is paying N22. If we increase it to N22 and you increase gas prices, investments will come into power. We have not done that. That is the issue.
“We are spending N500 billion subsidies on petroleum products and nobody will invest in refineries if they believe that their business model is predicated on government subsidy. We are borrowing N500 billion on subsidies every year. We are borrowing money and we are leaving future generations to pay the debt. And the benefits of these subsidies are far outweighed by the long-term cost to the economy. So, the reality is that the government is not pursuing the right economic policies. And nothing in the banking reform will fix the economy unless you fix policy. And I say this as an adviser to the government.”
The Minister of Information and Communications, Prof Dora Akunyili told journalists at the end of the Council session that the body resolved that the CBN and the Economic Management Team should properly coordinate to ensure that the nation’s economic reforms are properly channeled towards the real sectors of the economy.
Said Maku: “Council appreciated the candour and depth of the CBN governors’ report on the economy especially his determination to press ahead with critical reforms in spite of pressures from vested groups to derail the reforms which have saved the nation’s financial sector from deep crisis. The need for deeper reforms in the energy, petroleum and power sectors was emphasized to realign economic policies to the financial reforms to encourage credit flow into the real and strategic sectors of the economy.”
Speaking on the January 1, 2012 effective date for convergence of accounting standards in Nigeria with International Financial Standards (IFRS), Akunyili, noted that “accounting standards are benchmarks for the preparation of financial statements by private and public institutions. Individual nations used to set their accounting standards until the widely reported financial
scandals involving WorldCom and Enron in 2001.”
The Council approved the contract for the development of irrigation on 1,500 hectares of land and associated infrastructure, being Phase 1 of Tada-Shonga irrigation project located at Tada-Shonga in Kwara State. It is to cost a total of N3.26 billion.
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