April 24, 2014

Monetary Policies and the Nigeria 's Economic Development

Apart from his distinction in monetary policy at master degree program, Lamido Sanusi has displayed high level of competence in the application of such intellectuality towards the sanitization of our national monetary system; the process which has led to the ongoing reforms in the Nigerian banking sector.
 
Historically, as a result of the challenge facing our national monetary affairs, especially after the 2005 banking consolidation policy introduced by the former Central Bank of Nigeria  governor, Prof. Chukwuma Soludo; the question remained the way it was as to whom should the national monetary affairs be committed after the expiration of the Soludo’s tenure? Lamido Sanusi was found to fit such intelligence required for the position.
 
In attempt to ensure fast recovery from the weak conduct of monetary policy left behind by his predecessor, Sanusi adopted an instant monetary response with the aim to save the nation from the dilapidating effects of the global economic meltdown. This also contribute generally towards its resolution; followed by the positive approaches toward the restoration of the lost confidence of general public in the nation financial sector.
 
This was to be achieved from transparency and accountability in operation and activities of the banking industry, this process has helped Nigeria reduce the factors contributing to the retrogressive movement of the sector such as limited financial information, irregularities in operation of the banking sector at the Capital Market level, illegal share buyback, weak balance sheet, diminishing profits in the industry, non-performing loans among other problem that has contributed to the crisis in banking sector.
 
To ensure the expansion of economic activities through which the continuous threatening inflation that could creep up to our nation’s financial system could be reduced, Sanusi employed economic tactics to financially strengthen the operation of the Small and Medium Enterprises (SME) to bring about desire operation to the sector and the nation as well. This was initiated to achieve effective economic diversification and logically reduce the rising rate of inflation in the economy.
 
In attempt to work towards healthy, effective and fast movement in monetary operation, Sanusi join queue with the Monetary Policy Committee established by the institution so as to simultaneously deliberate on those matters of interest and the progressive movement of the economy. This logical development led to the recent approval of N200billion for small and medium credit guarantee scheme. This initiation would foster economic sustainability, rapid industrialization, poverty alleviation and employment generation in Nigeria .
 
Although, primarily the operation of small and medium scale enterprises is embodied on Small and Medium Enterprises Equity investment initiated in 1999, however, for the poor performance of the institution so far, the Monetary Policy Committee under Sanusi intervened in such attention seeking sector to provide credit facility to manufacturers and SMEs in the economy.
 
As a fast effort to resolve the crisis in the banking sector, Sanisi in collaboration with Security and Exchange Commission (SEC), imposed restrictions on the margin lending and made illegible shares under margin loan. Through this, CBN has been reported to have guided against indiscrimination in granting credit facility and abuse of procedures in obtaining loan.
 
Through this initiative, he ensured the reduction in excessive borrowing cost which scared the real borrowers away as previously imposed by the banks. This is expected to work in line with the Central Bank’s main rates and published monthly to ensure compliance and transparency. Through these measures, the banks would be encouraged to cut down lending rate and heighten credit facilities to the real sectors of the economy.
 
The Central Bank recent pronouncement has reported to have paved way for another phase of effective development in the banks as they develop appetite towards lending to the private sectors of the economy in line with such promulgated lending policy.
 
Besides, to avoid over concentration of loans on a single borrower and mounting stock of un-serviced loans, the Central Bank has proposed a maximum loans for manufacturers at N1billion. This will further expand the scope of beneficiaries for refinancing facility and loans diversification.
 
Another vital monetary achievement of the Central Bank is the recent amendment prudent guidelines classified two types of loans under which provisions were made for various loans: Specialized loans which comprise margin loans, object finance, project finance, real estate loans, mortgage loans, small and medium enterprises among others; and Other loans comprise of commercial and retail loans, overdrafts, commercial papers, banker acceptances, corporate among others. All aimed to achieve efficient regularity, accountability, transparency and conformity.
 
Apart from these, Central Bank mandated Monetary Policy Committee has been carrying out all possible efforts to eradicate window sizing or inflation of profit in the banking sector in replacement with real and practical banking system. To the committee it is a normal phenomena to make loss so, the banks should avoid forcing their ways towards realization of profits and payment of dividends.
 
For the developments which the economic and financial systems have recorded in recent period, new phases of development such as monetary and financial stability, temperate inflation, strength in money market and exchange rates, stability in banking system, revamped banking balance sheets, improved corporate governance, reduction in the rates of corruption and criminality, disclosure and transparency in financial operations among others.

Abubakar Jimoh
University of Abuja

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