How CBN wants to turn COVID-19 crisis into opportunity for Nigeria

The Central Bank of Nigeria (CBN) is preparing for the anticipated impact of the coronavirus on the nation's economy by announcing immediate, short and medium term measures expected to help the country absorb the looming global economic crisis without going into its second recession in six years.

The COVID-19 pandemic has had a significant effect on global economy, the price of crude oil which is the Nigeria's major source of revenue for funding its annual budget has been one of the worst hit and has been on a decline.

Nigeria's 2020 budget is based on an anticipated oil price of $57 per barrel, with the decline in the price of crude oil, the government has been forced to review this and peg the benchmark at $30 per barrel while maintaining proposed production volumes at 2.18 million per barrel.

A few weeks ago, the Minister of Finance, Zainab Ahmed said "The reduction of the crude oil price from the $57 per barrel we budgeted for to $30 means that we are going to get so much less revenue, almost 45 percent less than we planned, and because of that we have to amend a lot of projections in the budget to reflect our current realities."

The International Monetary Fund (IMF) has predicted that global economy will decline by 3% in 2020, and in response to the COVID-19 pandemic, countries are banning exportation of medical and food supplies to balance domestic consumption. Russia and Vietnam the largest producers of Wheat and Rice respectively have banned exportation. It's now every man for himself as countries are moving away from multilateralism to fight for themselves with measures to protect their people and economies

With global economy in turmoil and economists struggling hard to predict what the world will look like after the COVID-19 crisis and how long it take the economy to reinvigorate, CBN Governor Godwin Emefiele, released a document titled 'Turning The COVID-19 Tragedy into an Opportunity for a New Nigeria'.

In the document, Emefiele explained why it is important for Nigeria to look inwards for solutions and how the CBN plans to turn the present crisis into a stream of opportunity to rebuild the economy with immediate, short and medium term policy plans.

"This pandemic and the immediate response of our trading partners suggest it is now more critical than ever that we take back control, not just control over our economy, but also our destiny and future," the CBN governor said.

"In response to covid-19, we are strengthening the Nigerian economy by providing a combined stimulus package of about N3.5 trillion in targeted measures to households, businesses, manufacturers and healthcare providers. These measure are deliberately designed to both support the Federal Government's immediate fight against COVID-19, and also to build a more resilient, more self-reliant Nigerian economy."

Here is a timeline of CBN's immediate, short and medium term Policy Plan to reboot the economy:

Immediate-Term Policies (0-3 Months):

1. Ensuring financial system stability by granting regulatory forbearance to banks to restructure terms of facilities in affected sectors

2. Triggering banks and other financial institutions to roll-out business continuity processes to ensure banking services are delivered in a safe social-distance regime for all customers and bankers.

3. Granting additional moratorium of 1 year on CBN intervention facilities;

4. Reduction of interest rates on intervention facilities from 9 percent to 5 percent;

5. Creation of N50 billion targeted credit facility for affected households & SMEs;

6. Strengthening the Loan-Deposit Ratio (LDR) policy, which is encouraging significant extra lending from banks;

7. Improvement of FX supply to the CBN by directing all oil companies (international and domestic) and all related companies (oil service) to sell FX to CBN and no longer to the NNPC;

8. Provision of additional N100b intervention in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity;

9. Provision of N1 trillion in loans to boost local manufacturing and production across critical sectors;

10. Ensuring the poor and vulnerable are able to access financial services to meet their basic needs through banks, microfinance, community and non-bank financial institutions,

Short-Term Policy Priorities (0 – 12 months):

1. Reinvigorate financial support for the manufacturing sector by expanding the intervention all through its value-chain.

2. CBN will embark on a project to get financial institutions to finance homegrown and sustainable healthcare services that will reverse medical tourism out of Nigeria and ensure the country has world class affordable hospitals.

3. Establishment of InfraCo PLC, a world class infrastructure development vehicle with take-off capital of N15 trillion to support FG in building the transport infrastructure required to move agriculture products to processors, raw materials to factories, and finished goods to markets.

4. Priority would be given to the provision of FX for the importation of machinery and critical raw materials needed to drive a self-sufficient Nigerian economy.

Medium-Term Policy Priorities (0 -3 Years): (Post-COVID-19 crisis)

1. Light Manufacturing: To pursue a substantial economic renewal, initial intervention of N500bn targeted at manufacturing firms to procure state-of-the-art machinery and equipment and automated manufacturing models that would fast-track local production and economic rejuvenation, as well as support increased patronage of locally processed products.

2. Affordable Housing: To boost job creation, household incomes and economic growth, attention will be focused on bridging the housing deficit in the country by facilitating government intervention in three critical areas: housing development, mortgage finance, and institutional capacity.

3. Renewable Energy: Support the financing of environmentally friendly energy production.

4. Cutting-edge Research: Efforts will be channeled into driving innovation and research in every sector, through universities, research institutions, creative industry initiatives, and all other media of novelty and inventions.

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