External reserves hit 4-year high of $38.2bn on back of Eurobond issue

Following the success of the $3 billion Eurobond issue by the federal government last month, coupled with higher oil prices and production, the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, has disclosed that the country’s external reserves have hit a four-year high of $38.2 billion.
Emefiele made the disclosure Tuesday during the inauguration of a €10 million fully automated Blue Band margarine factory by Unilever Plc, in Agbara, Ogun State.
With the rate of accretion, the reserves are expected to meet the central bank’s projection of $40 billion by the end of 2017.
Emefiele said: “In January 2014, Nigeria’s reserves were about $40 billion and by October 2016, it had dropped to $23 billion, all because of the haemorrhaging of foreign exchange.
“But I am happy that today, we are beginning to sing positive songs and our story is looking good at this time. We have seen reserves move up from the $23 billion to $38.2 billion.”
The CBN governor commended the management of Unilever for heeding his call for manufacturers to look inwards to grow the economy.
The establishment of the factory, according to him, was a fallout of the central bank’s policy that restricted 41 items from accessing FX from the interbank market.
He stressed the need for the country to focus on job creation to cater for Nigeria’s rising population and create job opportunities for Nigerian youths.
He also emphasised on the need for private sector support, saying government alone cannot create jobs.
Emefiele went on to recall how Unilever was encouraged to establish the Blue Band margarine factory after it was faced with the ban on the 41 items that included margarine.
“I must thank Unilever for doing what they have done today. The restriction of FX for the 41 items came on board about two years ago. At that time, we were criticised.
“Before that time, Unilever had a factory producing Blue Band margarine. But margarine was also part of the 41 items. The managing director and the executive team of Unilever Nigeria visited me in Abuja and said they wanted us to grant them some form of forbearance.
“I said there was not going to be any forbearance and encouraged them to re-establish the factory in Nigeria, because at the time their factory had been dismantled in Nigeria and taken to another country.
“And he (Unilever managing director) made a promise that between 12 to 18 months the factory would be re-established in Nigeria,” he recalled.
According to him, based on the promise by Unilever’s management, the central bank granted the company some form of forbearance that made it easy for them to import margarine into Nigeria for a period.
He noted that the CBN kept monitoring the company to ensure that they did not renege on their promise, adding: “I must say that the managing director of Unilever is a man of his word and he kept to the promise that he was going to re-establish that factory.
“The entire essence is to say that by re-establishing that factory here in Nigeria, he is creating direct jobs for Nigerians in this factory and creating indirect jobs for Nigerians by virtue of the fact that he will buy palm oil which is the key ingredient that he uses in producing margarine.”
He expressed the readiness of the central bank to support any firm that wants to establish a company in Nigeria.
“I keep saying we do not have the foreign exchange to allocate to import products that can be produced in Nigeria. I am happy that Unilever has proved us right that Blue Band margarine can be produced in this country.
“So far, they are doing about 10,000 metric tonnes per annum and he has promised that he is going to ramp it up to 50,000 metric tonnes.
“By doing so, you create jobs, which is what we are talking about. By creating jobs, you save the country FX that is needed to create jobs,” he said.
Going down memory lane, Emefiele said when he drove past the Agbara industrial estate in Ogun State, he passed some of the companies he had visited as a young credit officer as a banker, but they were all closed down.
“At that time, Unilever was producing Blue Band margarine. The company that was producing glass has shut down, also the fluorescent companies have closed down.
“But the promise I am making to everybody, just as I made to Unilever, is that if there is any company that wants to set up shop in any part of this country, we will do all we can to assist it.
“If you want to re-establish your factory and you need our funding assistance, count on us to support you. Like I said, creating jobs is not just the responsibility of the central bank, we need support from the private sector and that is why we are making the promise that if there is an investor that is ready, he should count on us,” he said.
Earlier, the executive vice-president, Unilever Nigeria and Ghana, Mr. Yaw Nsarkoh, restated the commitment of the multinational to Nigeria. According to Nsarkoh, in spite of the fact that the company has been in Nigeria for over 90 years, the past few years had been the best.
According to him, the new plant consumes 50 per cent energy less than what the company’s previous plant, but produces a higher output.
“None of these would have been possible without the support of the central bank. In the face of the forex scarcity, the central bank continued to support Unilever and I want to thank you (Emefiele) for embarking on this journey with us,” he added.
The CBN Tuesday also announced that it was formulating a draft credit framework for Small and Medium Enterprises (SMEs) aimed at improving credit to the sector.
According to a statement posted on the central bank’s website, this was disclosed by Emefiele at a strategy meeting with select Development Finance Institutions (DFIs) and other stakeholders on enhancing access to credit to SMEs in the country.
According to him, the efforts would see more government intervention in the sector, resulting in job creation for youths in the country.
Emefiele noted that the meeting with the DFIs was as a result of the failure of lenders to make access to credit a priority.
He conveyed the government’s concern that the citizens were yet to feel the impact of the country’s exit from the recession, which he attributed to lack of appreciable growth.
Speaking further, he disclosed that President Muhammadu Buhari had mandated agencies to come up with programmes that would have Nigeria and Nigerians at heart.
The programme, according to him, would be one that would be impactful nationwide in terms of granting access to credit to the rising number of SMEs.
In spite of all efforts by the Bank to improve certain parameters of the economy, he said Nigerian lenders had failed small businesses.
Speakers at the strategy session were unequivocal in their attempt to find solutions to the failure of the commercial banks to extend credit to SMEs.
The representative of the only commercial bank at the meeting, First Bank of Nigeria, however, said everything boils down to the huge risks involved in giving credit to SMEs.
An Abuja-based manufacturer narrated how a commercial bank turned down his request for a loan of N160 million on the account of his N200-million factory that was located in Kubwa, on the outskirts of the Abuja metropolis.
Rounding off the discussion, Emefiele observed that the nation needed to strengthen the Bank of Industry (BoI) in order to make it compete favourably with commercial banks in the country.
A technical committee comprising the BoI, Development Bank of Nigeria (DBN), select DFIs, Bank of Agriculture (BOA) and the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL), to be chaired by the Director, Development Finance Department (DFD), Dr. Mudashiru Olaitan, was constituted and asked to submit its recommendations to the larger meeting in one week.
Emefiele said that the outcome of the committee’s work should form part of the theme of the annual Bankers’ Committee retreat in Lagos, scheduled to hold between 8 and 9 December 2017.
Those who attended the meeting included the Special Adviser to the President on Economic Matters in the Vice President’s Office, Dr. Adeyemi Dipeolu; Managing Director, DBN, Mr. Tony Okpanachi; and Managing Director, BoI, Mr. Olukayode Pitan.
Meanwhile, the CBN said Tuesday that it injected an additional $210 million into the foreign exchange market on Monday, in its bid to sustain liquidity.
Giving a breakdown, central bank spokesman, Mr. Isaac Okorafor, said the sum of $100 million was offered to the wholesale segment, while the SME segment got $55 million.
The Invisibles segment (i.e. tuition fees, medical payments and basic travel allowance, among others) was also allocated $55 million.
He said that the releases to successful bidders, which had been concluded were part of efforts aimed at further enhancing ease of doing business in Nigeria.
Hence, besides boosting liquidity in the FX market, facilitating trade and remittances for legitimate personal commitments were also expected to improve tremendously.
Speaking on the market conduct, Okorafor enjoined authorised dealers to abide by the extant rules of the market, as CBN would continue to monitor the market.
The naira maintained its value against the dollar, exchanging for N361/$1 on the BDC segment of the market Tuesday.
However, the official exchange rate of the naira appreciated to N306.85 to the dollar Tuesday, stronger than the N307 to the dollar from the previous day. – Thisday.