NESG Vs CBN Faceoff: Prospects for SMEs

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NESG vs CBN Faceoff: Prospects for SMEs
Nwolu Obiajulu

Most Nigerians were startled and bemused by the recent revelations by the Nigerian Economic Summit Group (NESG), against Nigeria’s apex Bank, Central Bank of Nigeria.

The NESG is a non-profit private sector organisation setup in 1966 with a mandate “to promote and champion the reform of the Nigerian economy into an open, private sector-led globally competitive economy”. It issued a 15-point statement jointly signed by its Chairman, Mr Asue Igbodalo and the Chief Executive Officer, Mr Laoye Jaiyeola where it made some damning accusations on the integrity of the CBN to stimulate the ailing Nigerian economy to thrive under the COVID-19 pandemic.

It concerns bothered on issues such as transparency and efficiency of agricultural intervention under the anchor borrowers programme; foreign exchange transactions, disbursement of intervention funds and price fixing without appropriate policy clarity; and provision of immunity for CBN officials in the recently amended Banking and Other Financial Institutions Act (BOFIA).

The private sector-led think-tank, had in the statement titled ‘Matters of Urgent Attention’, noted that despite huge budgetary allocations and large sums of money disbursed by the CBN through the Anchor Borrowers’ Programme, a huge gap remained in meeting the food requirements, resulting in increasing hunger among the Nigerian populace.

It said, “Evidently, the issues are beyond money and, therefore, require a complete overhaul of the management of, and support for the agriculture sector and all related sectors – with a view to getting more value for our investments,”

“The NESG notes with grave concern the rising level of poverty, unemployment and underemployment in our country which is predominant among our young people and has been exacerbated by the impact of COVID-19 and the slump in commodity prices.”

Reacting to the claims, the CBN had countered the allegations in very strong terms, claiming their interventions saved the country from food scarcity during COVID-19 lockdown.

It said, “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, 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,” the bank said.

The aftermath of the trade of words led to the resignation of three chief executive officers of banks who are board members of the NESG. They pulled out over the group’s criticism of some policies of the CBN, claiming they were not consulted before the public condemnation was made.

However, as the elephants fight, it is of most importance that this resort to public trade of words rather than use of internal mechanisms to resolve the concerns would positively benefit Small and Medium Scale Enterprises (SMEs) who seek funds to either start or expand their businesses.

The CBN had provided an intervention loan aimed at ameliorating the sufferings of families and small businesses which had been adversely affected during the peak of the COVID-19 induced lockdown in April. It offered up to N3.5 million loan to persons who applied at the time. Though some applicants had complained through various social media platforms of their applications not being granted, such interventions are most needful at this point in time when many citizens are grappling to survive the economic hardship occasioned by increase in petrol price and electricity tariff.

As NESG pointed out, CBN did not reveal the modalities and criteria used to disburse the loan to the beneficiaries. Applicants who were denied the loan were not informed of the yardstick that was employed.

It is important that the apex bank will utilise this scrutiny to intensify and scale up its intervention to accommodate more sectors of the economy which had previously not be been captured as well as improve its intervention for sectors which had already benefited.

It is only through such checks and balances that powerful and stable economies were built. As Nigerians enjoy the spectacle of the unfolding theatrics of the two giants, it is pertinent that effort is made to push for more people-oriented policies from the CBN and other key players.

The call by the CBN governor, Godwin Emiefiele at the Annual Banking and Finance Conference for banks to increase the percentage of loans available to the agricultural sector to 10 percent from the current 4 percent by 2024 can be viewed as a fallout of the face-off. Holding institutions accountable can only stimulate growth. It is expected that more reforms aimed at stimulating the economy through support funds and low interest loans will be further rolled out.

 

This post was written by Nwolu Obiajulu.

The views expressed here belong to the author and do not necessarily reflect our views and opinions.

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