Central Bank of Nigeria (CBN) will no longer be directly involved in development finance interventions.
A document obtained by The Nation stated that the decision is to enable the apex bank to focus more on “advisory roles that support economic growth.”
The document details plans by CBN Governor, Dr. Yemi Cardoso to reposition the apex bank.
The document contains the “preliminary assessment of the challenges facing the CBN.”
In it, Cardoso stated that “much has been made of past CBN forays into development financing, such that the lines between monetary policy and fiscal interventions have blurred.”
He clarified that “in refocusing the CBN to its core mandate, there is a need to pull it (CBN) back from direct development finance interventions into more limited advisory roles that support economic growth.”.
A source, who is privy to the document, said that “in the past, the CBN had been involved in providing funding for various developmental projects”, such as Anchor Borrowers Programme, among others.
“There is a growing recognition of the need to refocus the CBN to its core mandate and limit its involvement in direct development finance interventions,” he added.
He said: “Instead of directly funding projects, the CBN can provide guidance and expertise to help facilitate economic growth.
“This advisory role can include providing recommendations on policy measures, regulations, and strategies that support economic development.
“By limiting its direct intervention in development financing, the CBN can avoid potential conflicts between its role in monetary policy and its involvement in fiscal matters. This separation will allow the CBN to focus on its primary mandate of maintaining price stability, promoting financial stability, and ensuring the soundness of the banking system.”
The official added that “shifting towards an advisory role would allow the CBN to leverage its expertise and provide valuable insights to policy-makers and other stakeholders.
“The CBN can use its knowledge of the financial sector and its understanding of the broader economy to support decision-making processes that lead to sustainable economic growth,” he added.
In the document, Cardoso highlighted the advisory roles of the CBN to include:
•acting as a catalyst in the propagation of specialised institutions and financial products that support emerging sectors of the economy;
•facilitate new regulatory frameworks to unlock dormant capital in land and property holdings;
•accelerating access to consumer credit;
•expanding financial inclusion to the masses; and
•de-risking instrumentation to increase private sector investment in housing, textiles and clothing, food supply chain, healthcare, and educational supplies.
According to Cardoso: “These verticals have huge demand patterns, with the potential for high local inputs and value retention, and can be the basis for rapid industrialisation”.
The CBN, he said, would exercise “convening power to bring key multilateral and international stakeholder participation in government and private sector initiatives”.
Before listing other things he intends to do, Cardoso identified some of the challenges currently confronting the CBN.
According to him, “In assessing challenges currently facing the CBN, preliminary questions are being raised on addressing them.
The challenges are:
•Failure in corporate governance in CBN;
“How will issues of governance be addressed? Diminished institutional autonomy: How can public and financial systems’ stakeholder confidence be restored in the autonomy and integrity of CBN?
•Need to refocus CBN back to core functions:
“What needs to be in place to revert to evidence-based monetary policies? Discontinuation of unorthodox Monetary policies and Foreign Currency management?
•Unorthodox use of Ways and Means spending;
“ What controls can CBN develop to enforce statutory limits in the use of Ways and Means of financing public sector deficit?
•Backlog of FX demand;
“ How much of the backlog is real versus speculative/ hoarding? Are there creative financing options for clearing the short to medium-term backlog?
•Lack of clarity in fiscal and monetary relationships;
Where are the delineations, and what should be the limits in CBN’s fiscal side interventions? Inflation and price stability: What are the causes, and what is CBN’s proposed response to address inflation and price stability issues?
•Access to FX market and FX price discovery;
“What mechanisms exist to address FX rate unification under a willing buyer and willing seller arrangement? What should be the role of the Central Bank in the FX market? Is there a need for interest rate realignment to money supply, inflation, and market realities?
•Current Financial System Stability;
“What is the current state of the financial system? Are CBN surveillance frameworks being updated proactively to track the expanding use of electronic payment systems by Fintech and Telcos?”
