Some experts have hailed the Central Bank of Nigeria (CBN) for its intervention to enable the economy to pick up following the adverse effects of COVID-19, saying they were capable of fast tracking the recovery process.
The Chief Executive Officer – BIC Consultancy Services, Boniface Chizea said; “I think the size of the intervention we have seen from the CBN is more than adequate to spur a growth trajectory. What we should worry about is effective deployment.
“If properly deployed, we will see a “V” curve as against a “U” curve recession and from there, we can go on to attain the 2 percent growth projected for 2021 that is if the corona virus falters before the fourth quarter of 2020.”
A V-shaped recovery involves a sharp rise back to a previous peak after a sharp decline in these metrics. Because of the speed of economic adjustment and recovery in macroeconomic performance, a V-shaped recovery is a best case scenario given the recession.
Chizea said: “people have started to ignore the dangers of the Virus because we have to protect both life and livelihood. We are now developing protocols for restarting businesses and this is important because we have to get people working.
“As a government, we must quickly address insecurity as that will have an impact on farmers and the intervention in that sector may suffer once we lose the opportunity of the planting season.”
Professor of Capital Market at the Nasarawa State University, Keffi, Uche Uwaleke, said the government should channel the bulk of its loans to financing infrastructure, especially off-grid quick power solutions.
He said: “Local manufacturers face a high cost of production made worse by the high interest rate environment. To address this challenge, the government should channel the bulk of loans it is taking this year to infrastructure, especially power with emphasis on off-grid quick solutions.
“This will go a long way in not only reducing production costs, but also enhancing the standard and quality of products. Also, local manufacturers require off-takers so that the production line is not interrupted.”
The founder and Chief Executive Officer of LAPO Microfinance Bank, Godwin Ehigiamusoe, also spoke of the need for the CBN to include other Microfinance banks to broaden the disbursement of the N50bn household fund.
Ehigiamusoe said: “The intent of the CBN’s intervention through NIRSAL Microfinance Bank is commendable. However, given the result made available, there are certainly some challenges. Besides whatever steps being taken by NIRSAL Microfinance Bank to speedily improve disbursements, I strongly feel the position of the National Association of Microfinance Banks on the need for inclusion of more microfinance banks in disbursement of the fund, should be given consideration.
“The extensive footprint of these microfinance banks across the country will ensure greater and easy access to the funds by micro, small and medium enterprise.”
For the CBN Governor, Godwin Emefiele, the monetary interventions are not merely to contain the impact of the coronavirus on the economy. He sees it as the time to fully transform Nigeria into a modern, sophisticated and inclusive economy that is self-sufficient, rewards the hardworking, protects the poor and vulnerable, and can compete internationally across a range of strategic sectors.
Emefiele said: “In order to achieve this goal, we must begin immediately to support the Federal Government to: Build a base of high quality infrastructure, including reliable power that can engender industrial activity, Support both smallholder and large scale agriculture production in select staple and cash crops.
“Create an ecosystem of factories, storages, and logistics companies that move raw materials for value-added production, and finished goods to markets; Use our fiscal priorities to create a robust educational system that enables critical thinking and creativity, which would better prepare our children for the world of tomorrow.”
He also spoke about developing a healthcare system that is trusted to keep all Nigerians healthy, irrespective of social class. Facilitate access to cheap and long-term credit for Small and Medium-Scale Enterprises (SMEs) and large corporate, develop and strengthen pro-poor policies that bring financial services and security to the poor and the vulnerable, and expedite the development of venture capitalists for nurturing new ideas and engendering Nigerian businesses to compete globally.
Recall that there have been numerous reports about an imminent global recession occasioned by COVID-19, with even greater consequence for sub-Saharan Africa.
The International Monetary Fund (IMF) for instance in its latest edition of the World Economic Outlook report, projected that Nigeria is heading to a recession, its worst recession in three decades, as it expects the nation’s economy to recede by 3.4% in 2020.
Although sub-Saharan Africa is projected to have a growth of 4.1% in 2021, the IMF added that effective policies are essential to forestall the possibility of worse outcomes. The Fund also noted that necessary measures to reduce the coronavirus disease and protect lives are an important as well as investment in long-term human and economic growth.
Speaking to the importance of policies and intervention to forestall worst outcomes, Nigeria’s Finance minister, Zainab Ahmed also stated that the economic growth in Nigeria could contract by as much as -8.94% in 2020 in the worst-case scenario, -4.4% in the best-case scenario, if there was no stimulus and 0.59% contraction if there was a fiscal stimulus package.
She was quick to mention that with the effort of the Economic Sustainability Committee in bringing up a stimulus package, the country can reduce the impact of the recession.
Ahmed said, “And if we apply all that has been proposed and we are able to implement it, we might end up with a recession that is -0.4%. But in any case, we will go into recession but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021’’
The monetary authority, in what appears as deep foresight, had since moved resources to ensure a robust stimulus for major economic sectors of the economy including establishing a fund to support the country’s economy, targeted at households and micro and small enterprises.
In response to mitigate the negative impacts of COVID-19, the CBN moved to strengthen 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 measures are deliberately designed to both support the federal government’s immediate fight against COVID-19, but also to build a more resilient, more self-reliant Nigerian economy, the bank noted.
A breakdown of some of the specifics includes; N1 trillion in loans to boost local manufacturing and production across critical sectors. The interest rate has also been slashed and a moratorium has been announced on the principal repayments for CBN intervention facilities.
Other measures include a one year extension of a moratorium on principal repayments for CBN intervention facilities; the reduction of the interest rate on intervention loans from 9 percent to 5 percent.
Others are granting regulatory forbearance to banks to restructure terms of facilities in affected sectors; Additional N100 billion intervention fund in healthcare loans to pharmaceutical companies and healthcare practitioners intending to expand/build capacity; Identification of few key local pharmaceutical companies that will be granted funding facilities to support the procurement of raw materials and equipment required to boost local drug production.
It has also become imperative to assess the sufficiency of these interventions to avert the impending danger.