CBN Cushioning COVID-19 Impact On The Economy
The year 2020 started on a brighter and prospective note for Nigeria and
Nigerians, with the expectation of increased economic activities, arising
most especially, from the CBN’s sustained interventions in agriculture and
Small and Medium Enterprises (SMEs).
took on the world ravaging not only economies but with millions of human
casualties. Nigeria is battling to contain it, as no one expected its
devastating destructive capacity. Other viruses like SARS and Ebola were
not these destructive. It has no doubt brought unquantifiable damage to
world’s harmony and economic life.
In a series of intervention by the Central Bank of Nigeria, CBN, at the wake
of the novel COVID-19 Coronavirus outbreak, the Bank unveiled a
succession of targeted facilities starting with a N50billion credit facility,
followed by another N100billion credit support intervention for the health
sector. The Bank’s twin intervention funds were in quick response to the
coronavirus pandemic, which has caused unprecedented disruptions in
global supply chains, sharp drop in global crude oil prices, chaos in global
stock and financial markets, lockdown of large swaths movements of
persons in many countries, including Nigeria.
It also berthed here in Nigeria when the CBN was putting final dots on the
organisation of its second edition of ‘Going for Growth 2.0’. (The first edition
was held in Lagos in June 2019.) It is a Think-tank stakeholder assemblage
of practitioners in the private and public sectors, bureaucrats and
technocrats, bankers and industrialists concerned about the economic
wellbeing of Nigeria.
The stakeholder meeting was held at the head office the Bank and it
coincided with the outbreak of the novel COVID-19 virus. The fear of every
stakeholder was palpable knowing how fragile the economy is, and having
- just exited economic recession and on the verge of getting its groove back.However, the mono-product economy of Nigeria further exposed its fragilityand precarious situation, especially with the way advanced economieswere crumbling, battling how to salvage the ruins caused by the menace.The Nigeria situation is made worse as its major revenue source is hingedon oil proceeds for sustenance. Previous economic diversification effortswere only achieved on papers without commensurate commitment toachieve the programme.The CBN Governor shortly on assumption of office admonished thehandlers of the economy to brace up for the diversification of the economyto agriculture and non-oil products as the future of oil as source ofsustenance is nigh. Emefiele became the lonely voice in this advocacy. Hewas proved right when world oil prices dipped in 2015/2016 and theeconomy slipped into recession. Concerted efforts were made throughvarious monetary policy interventions to revive the economy. Hesucceeded when hope seemed lost. And ever since he had been on thefrontline canvassing for economic diversification and in the same veinfrowning at the increasing public debt without commensurate buffers. Hewas worried about the unabating internal security crisis caused by militancyand insurgence, particularly in the food producing areas of the country andhas gravely affected economic growth, food security, and rising inflation.The CBN had also been concerned about the inadequacy of infrastructurein the economy.These, and many more, are being addressed by the Bank in intervening inagriculture value chain, power, aviation, cotton and garment industryincluding ICT and the creative industry, as contained in the Bank’s five-yearPolicy Thrust. Notable is the matrimony between the monetary regulatorand deposit money banks under the aegis of Bankers’ Committee agreeingto work together for the economy. These were ongoing efforts whenCOVID-19 made its way into Nigeria.
- In his quick response to avert total collapse knowing that the economydoes not have the shocks required to weather the pandemic, he insequence to its earlier held ‘Going for Growth 1.0’ in Lagos last year,conveyed its second edition in expectation of likely economic disruptionthat may arise with the virus outbreak. Thus, he rallied a coalition of privatesector operators, including industrialists, bankers and business moguls, onthe urgent need to jointly combat the emerging COVID-19 crisis in Nigeria,particularly as the international crude oil prices were beginning to dipunprecedently in decades.Countries around the world are individually and frantically fighting forthemselves and their economies with different approaches peculiar to theirenvironment and needs. In this circumstance, Nigeria is not an exception.The challenge is being a mono-product economy, oil, dwindled fiscalbuffers, weak infrastructure, poverty and unemployment. Thus, thechallenge at hand is everyone’s problem that requires every hand on thedeck.Godwin Emefiele, the Governor of CBN, had said, “The need for allNigerians to play a role in this fight cannot be understated as we are quiteliterally in the fight of our lives. I must highlight the fact that this is not justabout bringing money. Your time, your services, your products will all behelpful.”Thus, from the foregoing, coupled with efforts being put in place, suitable toNigeria’s peculiar needs in combating the virus and immune the economyfrom crisis, the CBN Governor rallied a coalition, the Coalition of PrivateSector Against COVID-19, CACOVID, to support the Presidential TaskForce on COVID-19 set up by the Federal Government across itsresponse, where he outlined the objectives of the coalition to includemobilising private sector thought leadership; mobilise private sectorresources; increase general public awareness, education and buy-in;provide direct support to private and public healthcare’s ability to respondto the crisis and support government effort knowing that with the dwindledrevenue, the government alone at this period cannot handle this.
- The Coalition Against COVID-19 (CACOVID) is a private sector task forcein partnership with the Federal Government, the Nigeria Centre for DiseaseControl (NCDC) and the World Health Organisation (WHO) with the soleaim of combating Coronavirus, COVID-19, in Nigeria.This Coalition is tasked to pull resources across industries to providetechnical and operational support while providing funds and buildingadvocacy through aggressive awareness drives.In addition to the efforts of the federal government, the Coalition willprovide and equip medical facilities in the six geopolitical zones in Nigeria.This also involves the creation of testing, isolation and treatment centers,and include the provision of Intensive Care Units (ICUs) and moleculartesting labs.On its part to the cause, the CBN announced a N50 billion targeted creditfacility stimulus package with 5 percent interest rate, that aims amongothers, to cushion the adverse effects of COVID-19 on households andMSMEs, by supporting households and MSMEs whose economic activitieshave been significantly disrupted by the pandemic virus, and stimulatecredit to MSMEs to expand their productive capacity through equipmentupgrade, and research and development.While the twin N100 billion credit support intervention for the health sectorseeks to strengthen the industry’s capacity to meet potential increase indemand for healthcare products and services. Pointedly, the CBN notedthat “the scheme is to provide credit to indigenous pharmaceuticalcompanies and other healthcare value chain players intending to build orexpand capacity”.Emefiele further noted that, “the scheme is expected to improve public andprivate investment in the healthcare sector, facilitate improvements inhealthcare delivery and reduce medical tourism to improve foreignexchange conservation”.
- Obviously acknowledging MSMEs as the heart of any economy, the N50billion scheme will be financed from the Micro, Small and MediumEnterprises Development Fund (MSMEDF) to cover key economic activitiesincluding agricultural value chain, hospitality (accommodation and foodservices), airline service providers, manufacturing and value addition,trading and any other income generating activities as may be prescribed bythe CBN. To accomplish its objective, NIRSAL Microfinance Bank has beenchosen as the financial institution for the Scheme.The N100 billion health intervention fund as expected is to be funded fromthe Real Sector Support Facility-Differentiated Cash ReservesRequirement (RSSF-DCRR) and has Deposit Money Banks andDevelopment Finance Institutions (PFIs) as eligible to disburse the fund.The CBN action comes against the background of the governor’s pledge onassumption of office in 2014, when he promised to make the Bank acatalyst for economic growth. This underlies several monetary policymeasures he had initiated to keep the economy running. He did not stop atthat, he announced a N1.1trillion stimulus package to also support localmanufacturing and boost import substitution to ensure that laboratories,researchers, and innovators work with global scientists to patent andproduce vaccines.These efforts were initiated against global monetary and fiscal responses tothe debilitating effect of the COVID-19 attacks across the world in general,and Nigeria in particular. In the United States, the Congress approvedabout $2 trillion stimulus package in response to the economic impacts ofCOVID-19. While corporations will be the biggest recipients of the bailout,some of the fund will be paid directly to Americans hit by the pandemic withthose directly impacted by the economic effects of COVID-19 have beenslated to receive robust government support.
- The United Kingdom, had also launched a stimulus package to stabiliseBritain’s virus-hit economy, which include the government paying thewages of workers throughout the country. So also, is India, among othercountries.The federal government of Nigeria has also announced a N500 billionstimulus package as the fiscal response to keep the economy afloat.Though its details have not been revealed, as it is awaiting NationalAssembly approval.The CBN policy response to COVID-19 has thus provided a calm in theeconomy, helping manufacturers to continue production and keep plantsrunning to meet domestic demand without arbitrary price hike to account forthe rising cost of raw materials. These unprecedented initiatives to supportpharmaceutical and healthcare companies are commendable, given theshutdown of countries across the world, the rising spread of the COVID-19virus in Nigeria, and sustained panic buying of pharmaceutical productsdomestically.With the drop in the world price of crude oil, hovering around $20 – $26 p/b,about 57 percent below budget benchmark and revenue expectations,there is therefore an urgent need for the government to complement theCBN initiatives and go beyond its monetary interventions and fashion apragmatic and actionable fiscal stimulus package to assuage the effects ofthe lockdown on the poor and businesses.Ademola Oyetunji writes from Ibadan, Oyo State
