The coronavirus pandemic has hit both developed and developing economies hard. As a result of its unpalatable effect, the banking sector and other finance bodies in every country of the world are attempting to drive policies that would help to mitigate the impact of the pandemic on their country’s economy.
Nigeria, like other countries, has also taken measures to curb the outcome of the pandemic on the Nigerian economy. The Central Bank of Nigeria, together with other and finance bodies, has been actively working to ensure that the aftermath of the pandemic, especially in the economic terrain, is easier to manoeuvre.
The spread of COVID-19 globally has affected major and minor economies in the world so much that it has stunted global economic growth, interjected by disruptions across all sectors.
Since the outbreak in January, a deterioration in the global output has been recorded, which reflected in the fall in stock values, disorganisation of the global supply chain and inflation, as a major consequence of the enforcement of travel bans, border closures, implementation of social distancing and execution of lockdowns.
There have also been disruptions in global capital flows, uncertainty in major financial markets, rise in corporate debts in the advanced economies and rise in public debt in some developing economies. As expected, the world has fallen into recession.
The Nigerian economy has also been deeply affected by the pandemic. It has caused major disruptions in economic activities within the country, especially because developing economies such as ours depends on the major economies.
For instance, the pandemic has driven the price of crude oil at the international markets below the approved benchmark. Economic analysts in Nigeria are already anticipating a meltdown that can lead to recession.
CBN’s intervention
The state of the global economy is devastating. The International Monetary Fund has confirmed that the global economy has receded. Countries have been giving stimulus packages to critical areas of the economy, and Nigeria is not left behind.
On Monday, March 16, 2020, the CBN unveiled the first set of policies to tackle the impact of the pandemic on the Nigerian economy. The governor announced an immediate cut on the interest rate of all CBN intervention facilities from nine per cent to five per cent per annum for one year, from March 1.
The bank also announced its intervention of about N3tr under the various programmes it operated through Deposit Money Banks, including Anchor Borrowers Programme, and Agri-Business Small and Medium Enterprises Investment Scheme.
Since the pandemic would hugely affect the ability of the companies to repay the loans, the CBN has decided to cut down the interest rate. Also, the time for the repayment of loans has been extended by one year on all their principal facilities, particularly intervention loans, following the directive issued to participating financial institutions.
It was reported that the CBN would provide support to affected households, businesses and financial institutions to cushion the negative impact of the pandemic on the economy.
Loans were approved for pharmaceutical companies intending to expand their manufacturing plants in Nigeria, as well as hospitals and healthcare practitioners planning to build standard health facilities. In addition, the CBN governor announced the creation of a N50bn credit facility for SMEs and households affected by the pandemic.
On Wednesday, March 18, 2020, the CBN announced the N1.1tr intervention in all critical sectors of the economy. This is in addition to the incentives contained in the six-point palliative to ameliorate the impact of the COVID-19 on the Nigerian economy.
Of the sum, N1tr will be used to support local manufacturing and boost import substitution in the economy, which is also a way of creating more jobs for those directly affected by the pandemic.
The remaining N100bn will be used to support health authorities to ensure that laboratories, researchers and innovators work with global scientists to produce vaccines and test kits in Nigeria in preparation for any major crisis ahead.
The apex bank also activated aN1.5tr private sector Infraco project fund, which is set aside for building critical infrastructure.
“It is expected that through these interventions, about N3.5tr would be injected as stimulus to support the Nigerian economy during this trying time,” said the CBN governor, Godwin Emefiele.
Commendations have been going the way of the bank for taking the measures to cushion the effect of the pandemic on the country’s economy. The Relationship Manager, FSDH Merchant Bank Limited, described the CBN’s effort to support the economy through granting credits at concessionary terms as commendable.
“Monetary policies have their own limitations and cannot completely protect the economy against the impact of the covid-19. We need strong and bold fiscal policies to mitigate the adverse impact of COVID-19 and to build a resilient economy, even long after the COVID-19 issue is over,” he said.
A financial analyst, AyindeAyuba, said the policies and strategies implemented by the CBN would be beneficial to the Nigerian economy.
“From all indices, facts and figures around the world-affirming the shrinking impact of the pandemic on the global economy, the CBN has been able to implement policies that will help us as a nation in stimulating our economy and reducing the negative effect of the outbreak on individuals as well as corporate Nigerians.
“The policies would also ensure that businesses in Nigeria, especially the SMEs, are given adequate attention and intervention to prevent the economy from collapse and to foster the economic growth of the country,” he said.
