Of late, the Central Bank of Nigeria has been in the news. Its decision to set a floor (initially at 60 per cent, but subsequently increased to 65 per cent) on how much of their deposits banks may lend, has sent ripples through the industry. Its resolve not to go back on its pledge to put a cap on how much banks may invest in risk-free short-dated government gilts and raise banks’ minimum capital requirements, continues to ricochet around the financial services sector’s many echo chambers. Viewed through a certain lens, the consensus is that the apex bank only strengthened its resolve to drive domestic growth.

In this sense, the consensus underlined a different reality: that over the last five years, the central bank has contrived to dominate the conversation on the economy and preferred outcomes. The renewal of the central bank governor’s tenure in June, and his choice on resumption to announce these new policy thrusts, along with other thrusts enumerated in the bank’s Five-year Policy Thrust document, were arguably the novelties.

Otherwise, the new policy directions detailed by the CBN are consistent with a dirigiste mindset that saw the Bank build up huge liabilities in the last half-decade in the name of supporting domestic economic growth. The ban on domestic economic entities’ access to official foreign exchange resources for the importation of a growing list of items provided occasion for mirth and ridicule, especially with sundry government functionaries tripping over themselves to provide both explanation and justification for these policies.

The same could not be said, however, for the interventions in the foreign exchange and retail loan spaces. Here, the costs are clear. Depending on who you speak to, the Central Bank spends the equivalent of US$40 billion annually supporting the naira at the US$1:N365 exchange rate. Given that much of this is part of the guarantee at the non-deliverable forwards foreign exchange window needed simply to maintain non-resident investors’ interest in portfolio investments here, it is difficult to argue that we could not have found better use for these monies.

There is less clarity on how much the central bank has committed today to its retail lending, the so-called intervention programmes. But the danger that its balance sheet long eclipsed the combined balance sheets of what it refers to as deposit money banks (DMBs) is long past. The problem here is not so much that the central bank’s non-performing loans portfolio might be more impaired than those of the banks that it regulates. But that we have spent so much off the national exchequer with not much to show for it.

Key indicators of domestic economic health continue to plumb new depths daily, even as concerns grow about the continued viability of the country as a political construct. Not surprisingly, it has been argued that the test of the utility of the central bank’s policy portmanteau is a negative one. Not so much pro-growth, as anti-collapse.

The difficulty with this argument, however, is the absence of internal logic to a number of these initiatives. The intervention programme, for example, was conceived under the Sanusi Lamido Sanusi central bank, when it became obvious that the planned regulatory action against both Intercontinental Bank and Oceanic Bank was going to leave significant sectors of the economy exposed. The lending was thus conceived as bridging facilities until these players could complete the transition to commercial lending from other banks.

Today, the jury is out on which is the more burdensome of the new intervention strategy: the absence of a sunset clause, or the lack of a unifying set of ideals? Unfortunately, this latter worry lies like an albatross on the neck of the recently announced initiatives. What do we make of the goal of promoting Nigerian banks into the top-tier of global banking, as canvassed in the recently enumerated five-year plan? Will domestic banks then finance global cross-border transactions? Given existing constraints to global trade, and the closing down by major global financial institutions of their continent-spanning operations, how much of this goal is even consistent with the temper of the times?

By forbidding banks from holding government short-term debt, the central bank may create liquidity that banks will have to find outlets for. But this raises two questions and a vulnerability. First the questions. Would the central bank not be creating a two-tiered market for short-term government borrowing by its ban? One market for non-resident investors and retail investors, and another for banks? The invitation to arbitrage these markets is as alluring as the need would be inevitable for the central bank to up its bureaucracy simply to police a hurdle of its own creation.

Second is the question of whether the central bank is aware of lending opportunities in the market that commercial banks have simply thumbed their noses at. If anything, anecdotal reports of the difficulties the central bank is having with its own lending operations will seem to give the lie to this side of the coin. Yet, by raising the floor on the portion of deposits that banks are required to lend, and proceeding to implement its promised punitive measure – confiscating half of the portion of deposits accounting for the shortfall in banks’ lending below the required minimum on September 30 – the CBN has demonstrated that it is unflinching in its resolve.

Which brings us to the vulnerability aspect. Everyone agrees that the banks’ non-performing loans will have to go up as they race to the bottom to beat the quarterly deadlines for growing their asset in keeping with the apex bank’s adjustable thresholds. What measures, if any, are in place to manage this contingency, especially if the macro-financial conditions that underline either a build-up or reduction in NPLs do not become more favourable for banks? And how does the expectation of deterioration in banking asset quality as a result of these measures jive with the promised imposition of higher capital requirements on banks by the CBN under the rubric of its 5-year plan?

Poring through the plan, one notices the unmistakable clarity with which the Bank commits to doubling down on the intervention programmes, and the express wish to target these specifically at the agriculture and manufacturing sectors. Only in one of these sectors – agriculture – is subsidised credit accompanied by technical policy efforts to ‘de-risk’ the operating conditions that surround beneficiaries. Perhaps extending the de-risking policy thrust to micro, small and medium enterprises (MSMEs) might create conditions more favourable to the balance sheets of the CBN and the DMBs down the line. So far as we know, no such measure is in the works.

Likewise, concern remains rife over the seeming endorsement in the five-year plan of the CBN’s willingness to deploy its leverage as a market maker in the domestic foreign exchange market as a vehicle of trade policy, which represents the most visible area of concord between the monetary, fiscal and trade-industrial policy tandem at present. The implications for monetary policy independence and confidence notwithstanding, do the likely short-to-medium term effects of curtailing food imports, as recently canvassed, not carry negative implications for the CBN’s price stability objectives, given the likelihood of domestic food supply shortages and increases in prices? How quickly can the impetus the CBN hopes would be given to domestic food production by these measures materialise in order to support economic growth overall?

Some of the lofty financial systems development goals being canvassed in the CBN’s medium-term plan, like robust payment systems and faster financial inclusion, require the backdrop of a healthy economy. And it is not clear that the discernible policy mix being brewed by the Bank augurs well for the macroeconomic context that would underpin the pursuit of these aspirations.