U.S. Federal Reserve Interest Rate Stability Boosts Nigeria’s Foreign Reserve to $43 billion

• Bankers’ committee considers single-digit credit for creative industry

The Central Bank of Nigeria (CBN) Thursday said it expected further stability in the foreign exchange market in 2019, banking on the decision of the US Federal Reserve not to hike interest rate in the near future.

The apex bank added that the stability currently being enjoyed in the FX market had boosted the country’s external reserves to over $43 billion.

This is coming as the Bankers’ Committee has identified the creative industry and IT sectors as critical sectors to support social and inclusive growth in the country and was considering single-digit credit for the sectors.

CBN Director of Development Finance, Mr. Mudashiru Olaitan, explained that the reports that the US Federal Reserve will not raise rates was particularly good for emerging economies, including Nigeria as it means that the dollar is not going to strengthen against our currency.

“So, when we already have stability in our foreign exchange market, that is good news that is going to help stability,” he said.

Addressing journalists yesterday, alongside other banks chief executives at the end of the 342nd meeting of the Bankers’ Committee in Abuja, he said the committee deliberated on the global slowdown in economy, the downward growth projection by the IMF in 2019, partly as a result of the China, US trade tariffs war as well as Brexit.

However, he said the latest GDP growth figures from the National Bureau of Statistics (NBS) which showed the economy posted 2.38 per cent growth in the fourth quarter of last year offered some cheerful news for the country, stressing that the country’s economy forecast for the year looked impressive.

Also, the Group Managing Director/Chief Executive, Access Bank Plc, Mr. Herbert Wigwe, said the committee identified the creative industry and IT sector as critical sectors to support social and inclusive growth in the country.

He said the nature of financing would be long term debt at reasonable interest rates which could be as low as five per cent.

He said: “The nature of funding will be by way of long term debt at reasonable interest rates- far in single digits, it is not 10 per cent, not nine per cent; it could be within the range of five per cent, which is quasi-equity if you look.

“Again, as part of talent development, and huge population which needs to be educated in IT or movies, people need to pay to use these academies.

“What the industry is going to do is provide soft loans for most of these people, with very little equity at least to show participation because you don’t want to create a moral hazard- so they can use it, pay for these infrastructure, develop their talents and as they work, they can pay back those loans.

“So, that is broadly the mode of intervention, very unusual but enough to ensure that at the end of the day, we will all have huge levels of skills and talent being developed in millions to ensure that at the end of the day, this will affect our GDP growth rate and our earnings.”

He said: “We basically found out that the sector would generate significant amount of employment and given how Nigerians in the creative sector have done well in Nollywood, in music, it can have significant impact on employment as well as GDP and of course, Nigeria can become the heart for tourism if the whole sector is handled properly. It could be a source of foreign exchange earning capacity if we invest significantly in that sector.

“So there are four specific verticals that will be supported with a lot of resources: the music, movie, fashion and IT industries.

“And what the bankers committee wants to do is to help to provide relevant infrastructure or funding that industry participants would use to create relevant infrastructure and shared facilities for each and every vertical that I mentioned.”

“So, all of these efforts will happen before the beginning of the next quarter. The different participants, working with international institutions can start building the relevant infrastructure to support talent development and support of content in the different things that they do.

“The banking industry realises that it requires funding at reasonable interest rates and of course, other appropriate structures to make sure those industry are taken from their nascent stage where they are right now, until they become profitable and visibly support their own various value chain.”