The Central Bank of Nigeria (CBN) on Tuesday faulted the Nigerian Economic Summit Group (NESG) stance on some of its recent monetary policy initiatives, describing the group’s recent comments, particularly on its COVID-19 pandemic interventions, as ill-informed and capable of bringing the institution and governor into disrepute.
The apex bank, through a statement issued by its Director, Corporate Communications, Isaac Okorafor, was reacting to the nation’s economic think-tank group’s recent statement titled ‘Matters of Urgent Attention’, which criticized some the measures taken by the bank to cushion the adverse effects of the Covid-19 pandemic on the economy.
Okorafor stated that said there are better ways for the NESG “to resuscitate its brand other than through cheap popularity and tarnished attention using ambushed press statements made up of contrived allegations”.
The apex bank noted that the allegations by the NESG “are reflective of sinister motives and malicious intent”.
The spokesman clarified further: “The attention of the Central Bank of Nigeria (CBN), has been drawn to a recent press release titled “Matters of Urgent Attention” by the Nigerian Economic Summit Group (NESG), which calls into question some of the measures taken by the CBN to support the stability of our financial system and enable faster recovery of our economy, following the negative impact of the COVID-19 pandemic on Nigeria.
“As we all are aware, the impact of COVID-19 on countries across the world resulted in a significant downturn in the global economy. Consequently, countries including Nigeria were forced to impose lockdown measures in order to contain the spread of the pandemic.
“This action resulted in depressed economic activity in the first half of the year. Except for China and Vietnam, advanced, emerging and frontier market economies, all experienced significant negative growth in the first half of 2020, and some are currently in a recession.
“In response to these unfortunate events across the globe, central banks have embarked on measures aimed at stabilizing their respective economies by reducing lending rates, which declined to negative territory in several advanced economies, in addition to increasing the scale of their asset purchase programmes.
“Indeed, after reducing its Federal Funds rate to 0 percent, the US Federal Reserve Bank implemented a huge securities purchase programme, which included purchase of corporate bonds (including those below investment grades). The Reserve Bank also provided credit facilities to non-bank institutions which included, money market funds and corporations.
“The balance sheet of the US Federal Reserve in support of these activities increased by over $3 trillion, while the European Central Bank expanded its balance sheet by over $1 trillion. Furthermore, the Bank of England in an unusual move gave an open check to the UK Government in order to fund its recovery efforts.
“It is therefore pertinent to state that the Nigerian economy is not immune from these crises given the over 65 percent drop in commodity prices; disruptions in global supply chains and the unprecedented outflow of over $100bn of debt and equity funds from emerging markets between March and May 2020; in addition to the impact of the lockdown on economic activities.
“These activities resulted in an over 60 percent reduction in revenues due to the Federation Account, a significant drop in foreign currency inflows, which led to downward adjustments in the naira/dollar exchange rate and a rise in inflation due to the exchange.
“On the CBN’s development finance activities, we are comforted by the NESG’s reluctant admission that many Central Banks around the world are also engaging in similar actions. The CBN engaged in development finance in order to address the credit needs of the sectors critical to improving livelihoods, reducing poverty, and promoting inclusive growth.
“These goals have become doubly important in light of the significant shocks to the economy following the ongoing COVID-19 pandemic. In pursuit of transparency, the CBN usually publishes disbursements made under these activities in our Economic Reports.
“Although the bourgeoisies atop the NESG may not feel the impact of the Bank’s development finance activities, many ordinary Nigerians, including smallholder farmers, households, and medium-scale entrepreneurs across the country know better.
“As encapsulated in our most recent monthly economic report published on the Bank’s website, a total of N38.11 billion was disbursed as loans to 44,458 beneficiaries through the NIRSAL Microfinance Bank (NMFB). This number has risen to N59.12 billion; supporting to 103,189 beneficiaries as of August 2020.
“It is important for the NESG to note that our intervention programmes in the agricultural sector were a key contributor to the resilience of the agricultural sector during the crisis, as the sector experienced positive growth of 1.6 percent in the second quarter of the year despite the lockdown.
“As the NESG may be aware, as a result of the COVID-19 pandemic,Vietnam, Cambodia, India, and Thailand placed export restrictions on the exports of critical food items, including rice and eggs. With these disruptions, the Nigerian economy could have faced a major food crisis, but for the government’s intervention programmes in the agriculture sector.
“Furthermore, by alluding to the fact that money cannot address constraints in the agriculture sector, the NESG failed to realize that access to credit is listed among the three major challenges faced by farmers and businesses in Nigeria.
“While the Federal Government is seeking to address issues such as access to electricity and logistic constraints faced by businesses, it was vital for the CBN to address an area that we had sufficient ability to impact upon, given the nature of the crisis we faced, which is improving the flow of credit to critical sectors of the economy.
“Contrary to the NESG’s allegation that our lending process is devoid of a proper framework, it is important to note that recipients of intervention funds from CBN go through an expansive due diligence process through participating financial institutions (PFI), following which an additional assessment process is embarked upon by the CBN before disbursements are provided. The PFIs expend extensive due diligence on these intervention loans as the risk of default lies with them.
“On the revisions to the BOFIA Act, there are many reasons why we see a total ignorance or malicious intent on the part of the NESG. First, the provision they refer to as being currently conceived as part of the new BOFIA already exists as Section 53 in the old Act, which is now Section 51 in the amended Act passed by the National Assembly. The current bill has not proposed any changes to that section at all.
“Second, contrary to their misleading anxiety and associated reportage, the provision of Section 51 does not purport to confer immunity on the Governor of the Central Bank of Nigeria like that which obtains for State Governors. Rather, this provision protects the Federal Government, the Central Bank of Nigeria and their respective officials against adverse claims for actions or omission in good faith exercise of powers under BOFIA and other specified statutes including the Central Bank of Nigeria Act and regulations made thereunder.
“The import of the said provision is to set a threshold against which suits against public officers must be filtered, such that for a suit to be maintainable it must scale that threshold by proving bad faith on the part of the pubic officer. It is not a bar against action.
“Indeed, a review of the legislative history of BOFIA will readily show that the said provision also appeared as Section 49(1) of the then BOFIA of 1991. Further digging also readily show that the same law is employed in other legislations including the extant:
a. Central Bank of Nigeria Act 2007 (Section 52), b. the NDIC Act 2006 (Section 55) and c. the Investments and Securities Act 2007(Section 302).
“A similar provision is in the AMCON (Amendment) Act 2020, as it had been noticed that debtors and the like simply rush to court, obtain injunctions and stop orderly resolution of cases and proper implementation of the law.
“The false alarm raised by the Nigerian Economic Summit Group raises serious credibility questions on the actions of the group, as its comments, which have been circulated across the globe, significantly harmed the credibility of the Governor and the CBN as an institution.
Okorafor elaborated on various other ways the measures taken by the apex bank remained in the nation’s interest, particularly based on their economic development and financial system stability benefits.
