- Good as it is, regrettably, with hindsight, this alone cannot guarantee desired result
FOR an apex bank that has long shed the toga of conservatism for an activist development banker role, we must admit that the latest proposal by the Central Bank of Nigeria (CBN) for a N400 billion Real Sector Support Facility (RSSF) merely follows a familiar trajectory of strategic, sectoral intervention. Announcing the coming of the new facility at a public event in Lagos, CBN governor Godwin Emefiele stated that the RSSF will not only have as its target projects in manufacturing and agriculture, but will be disbursed to beneficiaries at a single digit interest rate of nine per cent.
At the moment, we can count nearly a dozen of such strategic interventions that the apex bank has undertaken in the last few years. Among these are the Agricultural Credit Guarantee Scheme Fund (ACGSF); the N200billion Commercial Agricultural Credit Scheme (CACS), the N200billion SME Restructuring and Refinancing Facility (SMERRF), the N300billion Power and Airline Intervention Fund (PAIF), the N220billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the Textile Sector Intervention Facility (TSIF).
All – without exception – find justification in the failure by commercial banks to serve the interests of critical economic players in the area of credit availability and affordability. They also find their common denominators in the comparably lower (single digit) interest rates, and the factor of convenience to the extent that credit administration is often times on such flexible terms to enhance operations – as against commercial bank loans whose interest rates are not only cut-throat but are more often than not, short-term and inflexible.
Talking specifically about the RSSF, that the two sectors being targeted remain by far the most strategic in terms of their potentials to create jobs, reduce the current heavy reliance on imports and ultimately lift the country’s Gross Domestic Product (GDP) is beyond debate. Equally true is that the sectors are still largely, ill-served under the current palpably inadequate and frustratingly usurious lending regime. If only for the boost in the pool of loanable funds that it promises, the much reduced interest rates which come close to the magic that the two sectors have long sought for, it certainly would be hard to deny its merit at this time.
It seems one sure way to boost domestic output and enhance their competitiveness.
But two questions naturally arise: First is whether the interventions by the CBN do not in fact detract from its duty to work assiduously to bring interest rates to a more manageable level. Clearly, if we understood the need for a special lending window for manufacturers and farmers as borne of exigencies rooted in the structure of our malformed economy, what remains to be seen are concrete efforts by the CBN and the Federal Government to address the problem of outlandish interest rates on a more permanent, sustainable basis. Or will the CBN continue to create new lending window for every sector that appears to be in dire need of intervention?
Related to this is whether the initiative can translate to much in an environment where basic infrastructure are not only lacking but costs are constantly rising. Here, if the lesson from the textile sector revitalisation fund under which the Federal Government pooled N100billion to revive the sector is any instructive, it is that the existence of a pool of funds is not necessarily a guarantee of positive outcomes without adequate attention to the macro-economic environment. The case of aviation intervention fund is even more depressing. A good number of the beneficiaries simply took what was supposed to be a lifeline as their share of the proverbial national cake without as much as bothering to inject them into their operations, leaving the sector worse for it.
In the end, the challenge isn’t so much about the desirability but ensuring that the funds are used for the purpose for which they were meant. Again, we can only hope that appropriate lessons have been learnt from previous interventions.