N150 BILLION LIFELINE FOR THE REAL SECTOR
The Central Bank of Nigeria (CBN) took a bold step recently when it announced a N150 billion credit facility for the manufacturing sector, which is currently hindered by paucity of funds. The CBN Governor, Mr. Lamido Sanusi, while announcing the lifeline after the Monetary Policy Committee (MPC) meeting in Abuja, said the financial stimulus is meant to benefit about 150 manufacturing companies.
He promised that the fund will be disbursed very soon, but the beneficiary firms must meet the requirements already set out in documents prepared by the apex bank. Sanusi further noted that the bailout package for the sector is an integral part of CBN's reform agenda, to give the much-needed boost to the manufacturing sector, which forms the fulcrum of the economy.
We heartily welcome this lifeline to the real sector by CBN. It is a measure that can, if well managed, breathe some life into the ailing sector. The place of the real sector in any economy cannot be over-emphasized. For many years now, it has faced untold problems, which forced many industries to close shop.
Some of these problems include lack of adequate credit facility, high interest rates, erratic power supply, high cost of production and lack of basic infrastructure such as good road network. Other problems are high cost of imported raw materials, unfavourable trade policy, rising inflation and poor investment climate. All of these are constraints to Nigeria's economic growth.
Therefore, the N150 billion should be seen as a fresh strategic initiative to turn around the manufacturing sector, to position it properly to perform its expected role in the economy. But, this can only happen if the fund is judiciously utilized.
Effective monitoring and evaluation is crucial. Previous credit facility to the sector could not yield the desired results because those who needed the bailout most did not have access to the facility, while companies that did not quite need the money had unhindered access to it. We advise that the conditions for eligibility for the credit facility should be liberal enough, while the CBN must closely supervise the disbursement.
CBN should explain the criteria it used in arriving at the number of 150 companies it has slated to benefit from the financial package. There is need for the apex bank to work closely with the Manufacturers Association of Nigeria (MAN) to see that the fund gets to the right end users. If the manufacturing sector is given its pride of place in our economy, it has the potential to support the economy and even replace oil as the nation's main revenue earner.
What is necessary for this to happen is the removal of the political and socio-economic conditions that hinder investment in the real sector. For instance, government at all levels must demonstrate political will to revamp infrastructure as well as make the environment safe for investments. Unless this is done, the real sector will still be gasping for breath, regardless of the amount of financial lifeline injected into it. Sincerity of purpose on all sides, especially on the part of government, is imperative.
Last year, the CBN announced the floating of a N200 billion bond for commercial farmers, to enhance the development of commercial agriculture and guarantee food security. The plan was to make the fund available to the commercial farmers before the planting season. But, reports indicate that the objective is yet to be realised. This should not be allowed to be the fate of manufacturing firms that are meant to benefit from the N150 billion lifeline.
Also, CBN should carefully select the banks through which the disbursement of the funds will be made. Past experience has shown that some selected banks warehouse such facilities to make profit, instead of releasing the funds to the beneficiaries. That was exactly the case with the government's N100 billion agriculture fund, when two leading commercial banks in the country allegedly refused to disburse the amount lodged with them. A mechanism should be put in place to ensure that the N150 billion meant for the real sector does not suffer the same fate.