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).

Economic indices also proved this until what was believed to be a localised virus in a town, Wuhan, in China,

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 fragility

and precarious situation, especially with the way advanced economies

were crumbling, battling how to salvage the ruins caused by the menace.

The Nigeria situation is made worse as its major revenue source is hinged

on oil proceeds for sustenance. Previous economic diversification efforts

were only achieved on papers without commensurate commitment to

achieve the programme.

The CBN Governor shortly on assumption of office admonished the

handlers of the economy to brace up for the diversification of the economy

to agriculture and non-oil products as the future of oil as source of

sustenance is nigh. Emefiele became the lonely voice in this advocacy. He

was proved right when world oil prices dipped in 2015/2016 and the

economy slipped into recession. Concerted efforts were made through

various monetary policy interventions to revive the economy. He

succeeded when hope seemed lost. And ever since he had been on the

frontline canvassing for economic diversification and in the same vein

frowning at the increasing public debt without commensurate buffers. He

was worried about the unabating internal security crisis caused by militancy

and insurgence, particularly in the food producing areas of the country and

has gravely affected economic growth, food security, and rising inflation.

The CBN had also been concerned about the inadequacy of infrastructure

in the economy.

These, and many more, are being addressed by the Bank in intervening in

agriculture value chain, power, aviation, cotton and garment industry

including ICT and the creative industry, as contained in the Bank’s five-year

Policy Thrust. Notable is the matrimony between the monetary regulator

and deposit money banks under the aegis of Bankers’ Committee agreeing

to work together for the economy. These were ongoing efforts when

COVID-19 made its way into Nigeria.
In his quick response to avert total collapse knowing that the economy

does not have the shocks required to weather the pandemic, he in

sequence to its earlier held ‘Going for Growth 1.0’ in Lagos last year,

conveyed its second edition in expectation of likely economic disruption

that may arise with the virus outbreak. Thus, he rallied a coalition of private

sector operators, including industrialists, bankers and business moguls, on

the urgent need to jointly combat the emerging COVID-19 crisis in Nigeria,

particularly as the international crude oil prices were beginning to dip

unprecedently in decades.

Countries around the world are individually and frantically fighting for

themselves and their economies with different approaches peculiar to their

environment and needs. In this circumstance, Nigeria is not an exception.

The challenge is being a mono-product economy, oil, dwindled fiscal

buffers, weak infrastructure, poverty and unemployment. Thus, the

challenge at hand is everyone’s problem that requires every hand on the

deck.

Godwin Emefiele, the Governor of CBN, had said, “The need for all

Nigerians to play a role in this fight cannot be understated as we are quite

literally in the fight of our lives. I must highlight the fact that this is not just

about bringing money. Your time, your services, your products will all be

helpful.”

Thus, from the foregoing, coupled with efforts being put in place, suitable to

Nigeria’s peculiar needs in combating the virus and immune the economy

from crisis, the CBN Governor rallied a coalition, the Coalition of Private

Sector Against COVID-19, CACOVID, to support the Presidential Task

Force on COVID-19 set up by the Federal Government across its

response, where he outlined the objectives of the coalition to include

mobilising private sector thought leadership; mobilise private sector

resources; increase general public awareness, education and buy-in;

provide direct support to private and public healthcare’s ability to respond

to the crisis and support government effort knowing that with the dwindled

revenue, the government alone at this period cannot handle this.
The Coalition Against COVID-19 (CACOVID) is a private sector task force

in partnership with the Federal Government, the Nigeria Centre for Disease

Control (NCDC) and the World Health Organisation (WHO) with the sole

aim of combating Coronavirus, COVID-19, in Nigeria.

This Coalition is tasked to pull resources across industries to provide

technical and operational support while providing funds and building

advocacy through aggressive awareness drives.

In addition to the efforts of the federal government, the Coalition will

provide 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 molecular

testing labs.

On its part to the cause, the CBN announced a N50 billion targeted credit

facility stimulus package with 5 percent interest rate, that aims among

others, to cushion the adverse effects of COVID-19 on households and

MSMEs, by supporting households and MSMEs whose economic activities

have been significantly disrupted by the pandemic virus, and stimulate

credit to MSMEs to expand their productive capacity through equipment

upgrade, and research and development.

While the twin N100 billion credit support intervention for the health sector

seeks to strengthen the industry’s capacity to meet potential increase in

demand for healthcare products and services. Pointedly, the CBN noted

that “the scheme is to provide credit to indigenous pharmaceutical

companies and other healthcare value chain players intending to build or

expand capacity”.

Emefiele further noted that, “the scheme is expected to improve public and

private investment in the healthcare sector, facilitate improvements in

healthcare delivery and reduce medical tourism to improve foreign

exchange conservation”.
Obviously acknowledging MSMEs as the heart of any economy, the N50

billion scheme will be financed from the Micro, Small and Medium

Enterprises Development Fund (MSMEDF) to cover key economic activities

including agricultural value chain, hospitality (accommodation and food

services), airline service providers, manufacturing and value addition,

trading and any other income generating activities as may be prescribed by

the CBN. To accomplish its objective, NIRSAL Microfinance Bank has been

chosen as the financial institution for the Scheme.

The N100 billion health intervention fund as expected is to be funded from

the Real Sector Support Facility-Differentiated Cash Reserves

Requirement (RSSF-DCRR) and has Deposit Money Banks and

Development Finance Institutions (PFIs) as eligible to disburse the fund.

The CBN action comes against the background of the governor’s pledge on

assumption of office in 2014, when he promised to make the Bank a

catalyst for economic growth. This underlies several monetary policy

measures he had initiated to keep the economy running. He did not stop at

that, he announced a N1.1trillion stimulus package to also support local

manufacturing and boost import substitution to ensure that laboratories,

researchers, and innovators work with global scientists to patent and

produce vaccines.

These efforts were initiated against global monetary and fiscal responses to

the debilitating effect of the COVID-19 attacks across the world in general,

and Nigeria in particular. In the United States, the Congress approved

about $2 trillion stimulus package in response to the economic impacts of

COVID-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 with

those directly impacted by the economic effects of COVID-19 have been

slated to receive robust government support.
The United Kingdom, had also launched a stimulus package to stabilise

Britain’s virus-hit economy, which include the government paying the

wages of workers throughout the country. So also, is India, among other

countries.

The federal government of Nigeria has also announced a N500 billion

stimulus package as the fiscal response to keep the economy afloat.

Though its details have not been revealed, as it is awaiting National

Assembly approval.

The CBN policy response to COVID-19 has thus provided a calm in the

economy, helping manufacturers to continue production and keep plants

running to meet domestic demand without arbitrary price hike to account for

the rising cost of raw materials. These unprecedented initiatives to support

pharmaceutical and healthcare companies are commendable, given the

shutdown of countries across the world, the rising spread of the COVID-19

virus in Nigeria, and sustained panic buying of pharmaceutical products

domestically.

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 the

CBN initiatives and go beyond its monetary interventions and fashion a

pragmatic and actionable fiscal stimulus package to assuage the effects of

the lockdown on the poor and businesses.

Ademola Oyetunji writes from Ibadan, Oyo State