CBN: Staying on course amid COVID-19 second wave

Even as the second wave of COVID-19 continues to dim hopes of an imminent end to the unprecedented crisis unleashed by the virus, the Central Bank of Nigeria (CBN), under the leadership of Mr. Godwin Emefiele, is focused on pursuing policies aimed at ending the nation’s oil dependence, writes TONY CHUKWUNYEM


Clearly, Nigeria, like virtually every other country in the world, is grappling with coronavirus (Covid-19) induced-economic challenges. Although the pandemic initially started as a public health crisis in China in late 2019, by the middle of last year, it had evolved into a global economic crisis that most experts argue, is worse than the 2008 global financial crisis.


During that crisis, more than a decade ago, the price of oil, the commodity that accounts for over 70 per cent of Federal Government revenue and about 90 per cent of Nigeria’s export earnings, fell from over $100 per barrel to below $30.


The development triggered a crisis in the country’s financial sector, leading to the collapse of several banks and massive job losses.


Clamour for end to Nigeria’s oil dependence


Given the severity of that crisis, there was lot of talk about the urgent need for the nation to finally break from its oil dependence and develop its non-oil sector, especially agriculture. In fact, before the advent of the oil boom years of the 1970s, the Nigerian economy was primarily agriculture-based.


The sector contributed about 65 per cent to the Gross Domestic Product (GDP) and accounted for 70 per cent of total exports, thereby providing the scarce foreign exchange needed for the importation of raw materials, machine spare-parts and other capital goods required for key industries.


It also employed a lot of Nigerians, thus enabling them to learn valuable skills and become useful members of society.


However, in the wake of the oil boom years, many farmers abandoned their farms and migrated to the towns and cities in search of white collar jobs.


The result was that the agriculture sector was so terribly neglected that Nigeria could barely feed its population. So, when oil prices dipped in the early 1980s, the Nigerian economy struggled as it was to do later in 2008.


Need for CBN’s development finance initiatives


In fact, with the 2008/2009 global financial crisis triggering a banking crisis in these parts, the Central Bank of Nigeria (CBN) de    cided to go beyond its primary roles of ensuring price and financial stability, by stepping up its developmental interventions to facilitate the country’s economic growth and development.


The leadership of the apex bank, at the time, reasoned that the banking system would be more protected if the country’s economy was not so vulnerable to oil price volatility. However, the next oil slump, which began in mid-2014, also saw the nation unprepared for the attendant crisis.


The man who saw tomorrow


It was this challenge that Emefiele inherited when he assumed office as CBN Governor in June 2014. Unveiling his 10-point agenda during his maiden press conference, he said the apex bank, under his watch, would use its resources to build a resilient financial system that will serve the growth and development needs of the country, adding that the bank would introduce a broad spectrum of financial instruments to boost specific enterprise areas in agriculture, manufacturing, health and oil and gas.


True to his pledge, the CBN, between late 2014 and 2019, vigorously pursued intervention schemes such as the Anchor Borrowers’ Programme (ABP), the Agricultural Credit Guarantee Scheme (ACGS), Commercial Agriculture Credit Scheme (CACS), the N220billion Micro, Small and Medium Enterprise Development Fund (MSMEDF), among others.


According to industry watchers, it was the success of the schemes, especially the ABP, which, within a few years, significantly boosted the country’s agricultural output( empowering over a million farmers), that convinced President Muhammadu Buhari to reappoint Emefiele for a second and final five term in May 2019. He thus became the first CBN Governor to serve for a second term since Nigeria’s return to democracy in 1999.



Prepared for external shocks


Following his reappointment, Emefiele unveiled a five-point agenda containing measures, which he said, the CBN, under his leadership and working closely with the fiscal authorities, would implement between 2019 and 2024 to help insulate the nation’s economy from potential shocks in the global economy.


He stated: “We pledge to target a double digit growth by the next five years and at the CBN, we commit to working assiduously to bringing down inflation to single digit; while accelerating the rate of employment.


Put succinctly, our priorities at the CBN over the next five years are the following; First, preserve domestic macroeconomic and financial stability; Second, foster the development of a robust payments system infrastructure that will increase access to finance for all Nigerians thereby raising the financial inclusion rate in the country; Third, continue to work with the Deposit Money Banks to improve access to credit for not only small holder farmers and MSMEs but also Consumer credit and mortgage facilities for bank customers.


Our intervention support shall also be extended to our youth population who possess entrepreneurship skills in the creative industry. “This group deserves our encouragement.


We shall also during this intervening period encourage our deposit money banks to direct more focus in supporting the education sector. Fourth, grow our external reserves; and fifth, support efforts at diversifying the economy through our intervention programmes in the agriculture and manufacturing sectors. We are confident that when implemented, these measures will help to insulate our economy from potential shocks in the global economy.”


Mitigating economic impact of pandemic


Obviously, at the time he made the aforementioned pledge, neither the CBN governor nor any financial analyst could have predicted that less than a year later, the country would be facing an external shock that would be as devastating as the Covid-19 crisis.


Apart from triggering a sharp drop in the price of oil (in April 20, last year, oil prices actually turned negative for the first time in history), the pandemic pushed governments around the world into   imposing strict covid-19 lockdown measures, which resulted in costly shutdown of their economies. In Nigeria, for instance, the economy was largely shutdown in April and in most parts of May last year.


As part of efforts to mitigate the economic impact of the crisis, the CBN swiftly introduced a combined stimulus package of about N3.5 trillion in targeted measures to households, businesses, manufacturers and healthcare providers, which analysts said, prevented the economy from suffering a worse contraction when, as widely expected, it slipped into recession in Q3’20.


Some of the measures rolled out by the regulator, included an extension of the moratorium on its various intervention programmes, interest rate reduction, creation of a N50 billion targeted credit facility and credit support for the healthcare industry. Others were strengthening the CBN’s Loan to Deposit Ratio (LDR) policy and regulatory forbearance.


Specifically, the Emefiele, at a press conference, announced a moratorium of one year on all principal repayments, effective March 1, 2020, as well as interest rate reduction on all applicable CBN intervention facilities from nine per cent to five per cent per annum for one year effective March 1, 2020.


He also announced the creation of a N50 billion (later increased to N300billion) targeted credit facility through the NIRSAL Microfinance Bank for households and Small and Medium sized Enterprises (SMEs) that have been particularly negatively impacted by the virus outbreak including but not limited to hoteliers, airline service providers, health care merchants, among others.


In addition, he said the apex bank would extend its intervention facilities to provide loans to pharmaceutical companies intending to expand/open their drug manufacturing plants in the country.


Furthermore, the CBN Governor announced a regulatory forbearance for deposit money banks to help preserve financial stability in the face of the ravaging coronavirus.


He said the CBN would immediately grant all DMBs leave to consider temporary and timelimited restructuring of the tenor and loan terms for businesses and households most affected by the outbreak of COVID-19 particularly oil and gas, agriculture, and manufacturing.


According to him, DMBs would be encouraged to continue to build capital buffers in order to improve the resilience of the industry. He noted, for instance, that revenue shortage caused by the impact of COVID-19 could make loan repayment difficult for individuals and organisations, who had subscribed to some of its intervention schemes, such as the ABP and the AGSMEIS among others.


GDP stronger than World Bank’s projection


Although as was widely expected, the National Bureau of Statistics’ (NBS) Q3’20 Gross Domestic Product (GDP) numbers confirmed that the economy slid into a second recession in four years, having recorded negative growth of 6.10 per cent and 3.62 per cent in Q2 and Q3’20 respectively, analysts have pointed out some bright spots in the data.




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