Nigeria, no doubt, has been hit by twin shocks – the COVID-19 pandemic and declining oil prices. The two problems have dealt a big blow on the social and economic lives of the people.
The crises, however, can be translated into opportunities to get the economy back to its footing.
Following the outbreak of coronavirus, there has been reduction in global GDP growth by 1.3 percent, with about $1.1 trillion being spent on the world economy.
Data from EY show 4.9 percent decline in global oil demand. Crude oil prices declined dramatically to as low as $17 per barrel by the end of March 2020, and $83 billion has been withdrawn from emerging markets since the start of the crisis. Also, there has been 30 to 40 percent decline in global Foreign Direct Investments (FDI).
Countries across the globe have responded by fighting for themselves with several measures to protect their own people and economies, regardless of the spillover effects on the rest of the world.
The Central Bank of Nigeria (CBN) has responded in several ways by supporting hospitals and pharmaceutical industry with low interest loans to immediately deal with the public health crises. The bank is also working with the private sector Coalition Against COVID (CACOVID) to support the Presidential Task Force on COVid-19 across its response , while mobilizing palliatives for the poor and vulnerable vulnerable.
Read also: COVID-19: CBN says working on grants, facilities to aid researchers produce local vaccines
Two months ago, the CBN announced its support of critical sectors of the economy with N1.1 trillion intervention fund.
As part of the monetary policy response to the Covid-19, the CBN created a N50 billion targeted credit facility through NIRSAL Microfinance Bank for households and Micro, Small and Medium Enterprise (MSMES)
Taking advantage of the opportunities created by the Covid-19, Edfin Microfinance Bank Limited, with special focus on education, last week, engaged school owners on how to assist them access the CBN intervention fund.
“As part of our plans to help our customers mitigate the impact of COVID-19 pandemic, we have scheduled a webinar for all our school owners to help them access the NIRSAL CBN Intervention Funds for COVID-19,” Bunmi Lawson, managing director/ceo, Edfin Microfinance Bank Limited, said.
“Please note this webinar is free. Edfin does not guarantee your application will be successful but it sure helps to fill the forms and additional documents properly. Edfin will stand as guarantor to its clients who have zero default days on 31st March 2020.”
Other monetary policy responses include: reduction of interest rates on all applicable CBN interventions from 9 to 5 percent; liquidity injection of N3.6 trillion (stimulus package in the form of loans) into the banking system; and granting of Deposit Money Banks (DMBS) leave to consider temporary restructuring of loan terms for businesses/ households affected by Covid-19.
Standard Chartered Plc, in April, introduced a three-month payment holiday on personal loans and retail mortgages to support clients during the current pandemic crisis in Nigeria.
Nigeria’s Private Sector Coalition Against COVID-19 (CACOVID) has contributed N27.2 billion, as at April 23, 2020.
On March 26, 2020, the CBN on behalf of the Bankers’ Committee and in partnership with the private sector led by Aliko Dangote Foundation and Access Bank, came together to form the CACOVID.
Ayodeji Ebo, managing director, Afrinvest Securities Limited, said the quantum of the CBN stimulus is less than 5 percent of GDP, hence impact will be limited. “
“While we expect a boost for the health sector given that the sector has been relying more on expensive bank loan for funding, the SME fund may not provide as much impact based on the size of fund relative to the funding gap in that space,” Ebo said.
President Muhammadu Buhari, on March 29, 2020, in a nationwide broadcast on the COVID-19 pandemic, ordered three months repayment moratorium for all Tradermoni, Marketmoni and Farmermoni loans. Ayodele Akinwunmi, relationship manager, investment banking at FSDH Merchant Bank Limited, believes there is an opportunity to rebuild the economy to achieve food security, diversified revenue, foreign exchange and employment generation. Time to build healthcare, education and infrastructure that will support sustainable growth.
The opportunities will be a function of how well the stimulus packages are targeted and implemented, according to Uche Uwaleke, professor of finance and capital markets at the Nasarawa State University, Keffi.
He said the opportunities will be lost if the intervention funds fall into wrong hands. So, the CBN should put in place a water-tight monitoring mechanism to ensure that the overarching objectives of containing and mitigating the negative impact of COVID-19 on lives and livelihoods are achieved.
“As we already know, the CBN has lowered interest rates on all its interventions and have commenced disbursement of N50 COVID’19 response concessional facilities through the NIRSAL to affected households and businesses. There is also the over N100 billion to tackle the health crisis due to the pandemic. These provide opportunities to revive agricultural value chains, small businesses as well as expand health facilities nationwide. The forbearance to banks is also an opportunity for them to restructure doubtful loans, improve liquidity position and prudential ratios especially NPLS,” Uwaleke said.
Laoye, Jaiyeola, past president and director general of the Nigerian Economic Summit Group (NESG), said the economic outlook for Nigeria was not favourable considering the sharp fall in global oil prices and the impact of the coronavirus on the economy.
He projected higher inflation rate going forward against the background of forex exchange shortages, devaluation arising from diminishing forex reserves and increase spending by the government to reinflate the economy.
Jaiyeola called on the government to review its economic policy and ensure a quick diversification of the economy to steer the country away from import dependence and increase non-oil revenue.
“In order for us to mitigate the negative impact of the twin shocks, we need to, as a country, maintain delicate balance between saving the lives of our people and growing the economy,” he said.
These twin shocks are not necessarily mutually exclusive, and both can be pursued simultaneously, Demola Sogunle, managing director/ceo, Stanbic IBTC Bank Plc, said.
Sogunle also stressed the need to diversify the economy from over -reliance on crude oil as a source of revenue and focus more on the real sectors such as agriculture, manufacturing, and SMES, adding that digitisation was clearly the way to go and future of banking going forward”.
