N300bn CBN real sector fund: Boost for declining industrial sector
The Nigerian economy is going through challenging times as reflected in the declining GDP, and the manufacturing sector is particularly hard hit in view of the scarcity of foreign exchange and rising interest rates. The economy contracted by 0.36 percent in the first quarter of 2016, while the manufacturing industry shrunk by 8.39 percent year- on- year, according to the National Bureau of Statistics (NBS).
The Forex situation is largely out of the hand of government, given that crude oil which accounts for over 90 percent of Nigeria’s FX earnings has fallen from over $100/barrel to about $40/barrel today, with declining production on the back of resurgent militant activities.
The Central Bank of Nigeria (CBN), in February last year, came up with a unique solution to address the rising interest rates especially for manufacturers of products that would result in import substitution or FX generation. The initiative was the Real Sector Support Facility (RSSF) scheme, which was designed to be a catalyst to spur the industrial development of the nation’s moribund industrial sector.
The objectives of the RSSF scheme are to increase output, generate employment, diversify the revenue base, increase FX earnings and conserve FX by backward integration projects to provide inputs for the industrial sector on a sustainable basis. In addition it aims to improve access to finance for the Nigerian SMEs in order to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors of the local economy.
“I believe that is this fund is appropriately disbursed at a single-digit rate, small-scale manufacturers like us will create more jobs and even export to earn foreign exchange,” said Ike Ibeabuchi, managing director of MD Services Limited, a chemicals-making firm.
Nigeria’s expectation is that this fund would be as impactful as other past initiatives of the CBN such as Commercial Agriculture Credit Scheme, the Manufacturing Refinance Scheme managed by the Bank of Industry and the Power & Aviation Intervention Scheme.
Stakeholders say the industrial space needs all the support as it is the largest employer of labour ofter agriculture and government, and has a far reaching impact on the lives of Nigerians in diverse sectors.
Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), has consistently said that manufacturing offers the economy an opportunity to diversify and create jobs, insisting that the sector needs single-digit loans to compete in the open market.
Experts say the leadership at the Central Bank, state and federal governments need to look at what transformed India, China, Singapore and Indonesia, among others; countries that were at par with Nigeria in the late 70’s. At the top of the list is the implantation of sound economic policies targeted at developing the local industries. Nigeria can only boast of Dangote Industries, but analysts think that the fund would have more names to talk about.
The Real Sector Facility has the following advantages: Job creation, increased industrial output, increased tax revenues for government, increased competitiveness of the country’s products, amongst others.
“We cannot continue to pay lip service to policies on which countless man hours were spent on policy research and development. At this stage of national development, we need more of implementation of our brilliant initiatives.
When will our policy implementers learn that we will need to implement this and other initiatives to move our country to it place of pride in the Committee of Nations?” an analyst, who holds a sensitive position in the country’s banking system, said
“We need to jumpstart the economy with the Real Sector Support Facility loans to industries. Now is the time to act,” the analyst said.
HOPE MOSES-ASHIKE