CBN DEVELOPMENT FINANCE INITIATIVES A PAPER PRESENTATION AT

1. CBN DEVELOPMENT FINANCE INITIATIVES A PAPER PRESENTATION AT MASTER CLASS ON CBN DEVELOPMENT FINANCE INITIATIVES FOR EDITORS ORGANISED BY CENTRE FOR FINANCIAL JOURNALISM NOVEMBER 5, 2016 Dr. M. A. Olaitan – Director Development Finance Department, CBN

2. OUTLINE • Introduction – Central Banks and the Development Debate • CBN Development Finance Initiatives • Objectives • Focal Sectors • The Approach to the Interventions • The Model of Financing the Interventions • The Policy Deliverables of CBN Development Finance Initiatives • Summary of CBN Development Finance Initiatives • Summary of Impact of CBN Development Finance Initiatives • Conclusion

3. CENTRAL BANKS AND THE DEVELOPMENT DEBATE Developmental Objective conflicts with Stability Objective ? Civil Society Policy Analyst Legislators Researchers

4. CENTRAL BANKS AND THE DEVELOPMENT DEBATE CONT’D Gerald Epstein (2009) has identified two schools of thought on central banking. The second is the “neo-liberal approach. The main components are: The first is the historically dominant theory and practice of central banking which involves • Central Bank independence • Inflation fighting (including adopting Gerald “inflation targeting”) • Use of indirect methods of monetary policy • This is called ‘best practices’ and prescribed by The International Financial Institutions such as International Monetary Fund (IMF) and other prominent economists. • Financing governments • Managing exchange rates, • Supporting economic sectors by using “direct methods” of intervention. • This, according to Gerald Epstein (2009) is the most important tasks of central banking and, among the reasons for their existence.

5. CENTRAL BANKS AND THE DEVELOPMENT DEBATE CONT’D • The global financial crisis undermined the essence of the orthodox approach promoted by IMF and the multilateral agencies. • The apologists of this school opined that widening the mandates of the central banks will promote sustainable economic development, inclusive growth and greening of the financial system, among others (German Development Institute, 2015). • The growth of east Asia economies like Japan, Korea and China has shown that central banks can usefully pursue certain developmental goals. • The Bank of Japan supported government’s industrial policy through credit allocation policies. While the central banks of France, Italy and Belgium have also devised different methods to support desired sectors such as manufacturing.

6. CENTRAL BANKS AND THE DEVELOPMENT DEBATE CONT’D The Bank’s interventions since 2009 had two major goals Strengthening of the financial system through quantitative easing policy in 2010 to: Direct support to industry that has high job creating capacity and other vital economic agents • address the persisting tight credit conditions and the continuing under-performance of key monetary aggregates • restructure/refinance DMBs’ exposures to the manufacturing sector and SMEs to ensure the smooth flow of credit to the real sector of the economy • Fast track the development and access to credit facilities by large commercial agricultural enterprises to increase output and create jobs • Facilitate access to affordable credit by micro and small businesses, particularly women enterprises. • promote investment in the power sector to achieve sustainable growth,

7. OBJECTIVES OF CBN DEVELOPMENT FINANCE INITIATIVES • The Bank’s interventions initiatives were introduced to: • Increase lending to the critical sectors of the economy; • Provide access to affordable credit; • Diversify the country’s economic base, create jobs and improve macroeconomic stability; • Boost the capacity of MSMEs; • Conserve foreign exchange reserves; • Encourage exports; and • Expand output of agriculture, manufacturing and services sub-sectors.

8. FOCAL AREAS OF CBN DEVELOPMENT FINANCE INTERVENTIONS AGRICULTURE MANUFACTURE MSMEs INFRASTRUCTURE These sectors have the potential for job creation, output growth, foreign exchange accretion, and poverty eradication.

9. CBN DEVELOPMENT FINANCE INTERVENTION - APPROACH CBN DEVELOPMENT FINANCE INITIATIVES PROGRAMMES & SCHEMES FOCAL SECTORS PARTICIPATING FINANCIAL INSTITUTIONS INSTITUTIONAL DEVELOPMENT CAPACITY BUILDING DMBs, MFBs, DFIs POLICY & REGULATION

10. MODEL FOR FINANACING CBN DEVELOPMENT FINANCE INTERVENTIONS

11. CBN DEVELOPMENT FINANCE INTERVENTION DELIVERABLES The broad policy deliverables of the interventions can be categorized as follows: INCLUSIVE GROWTH ACCESS TO FINANCE DIVERSIFY ECONOMY CREATE JOBS The question is to what extent has these been achieved? Has the interventions delivered on the intended benefits?

12. SUMMARY OF THE DEVELOPMENT FINANCE INTERVENTIONS

13. SUMMARY OF THE DEVELOPMENT FINANCE INTERVENTIONS

14. CBN INTERVENTIONS IN AGRICULTURE SECTOR AGRICULTURE

15. CBN INTERVENTIONS IN MANUFACTURING SECTOR MANUFACTURE

16. CBN INTERVENTIONS IN MSME SUB-SECTOR MSME

17. CBN INTERVENTIONS IN INFRASTRUCTURE INFRASTRUCTURE

18. The impact of the Initiatives can be evaluated on three parameters based on IMPACT OF CBN DEVELOPMENT FINANCE INTERVENTIONS OUTPUT RESULTS OUTCOMES The achieved short-term and medium term effects of outputs The changes in products, capital goods and services from the development intervention The results of what has been achieved following the provision of the intervention For the purposes of this discourse CBN’s interventions will be evaluated on the results, what we have achieved since the commencement of each of the intervention.

19. CBN INTERVENTIONS IN AGRICULTURE SECTOR - IMPACT AGRICULTURE

20. INTERVENTIONS IN AGRICULTURE – IMPACT ON LENDING AGRICULTURE

21. CBN INTERVENTIONS IN MANUFACTURING SECTOR - IMPACT MANUFACTURE

22. CBN INTERVENTIONS IN MSME SUB-SECTOR - IMPACT MSME

23. CBN INTERVENTIONS IN INFRASTRUCTURE - IMPACT INFRASTRUCTURE

24. SUMARRY OF IMPACT OF THE INTERVENTIONS – END OCT, 2016

25. SUMARRY OF IMPACT OF THE INTERVENTIONS – END OCT, 2016

26. SUMMARY OF IMPACT OF THE INTERVENTIONS – END OCT, 2016

27. SUMMARY OF IMPACT OF CBN INTERVENTIONS– END OCT, 2016

28. The Bank still has a major role to play in the socio- economic development of the country, though there could be conflict between price stability objectives and policies that promote sustainable development. • However, it should be conducted under the larger framework of enhancing growth and development with more intensive study done as to when, how and the quantum of resources to be dedicated to such interventions. • It is also imperative that continuous performance tracking and intensive periodic impact assessment should be undertaken in order to institute a clear exit strategy to know when it has outlive its usefulness. CONCLUSION

29. THANK YOU