CBN: Tackling COVID-19 pandemic with strategic economic interventions

Uche Usim, Abuja

In Nigeria, like in other countries across the globe, the COVID-19 pandemic created huge upheavals in virtually all spheres of activities.
The Nigerian economy was particularly hit, with over 65 per cent drop in commodity prices; disruptions in global businesses and the unprecedented outflow of over $100 billion of debt and equity funds from emerging markets between March and May 2020.
These activities resulted in an over 60 per cent reduction in revenues due to the Federation Account, a significant drop in foreign currency inflows. This led to downward adjustments in the naira/dollar exchange rate and a rise in inflation.
The Central Bank of Nigeria like other Central Banks across the world had to embark on extraordinary measures in order to stabilise the economy from an extraordinary shock. To enable a faster recovery of the economy, the CBN took pragmatic steps to increase the flow of credit to critical sectors.
CBN’s Director, Corporate Communications, Mr Isaac Okorafor, while responding to scathing criticisms from the Nigerian Economic Summit Group (NESG), explained some of the bank’s interventions.
His words: “We gave a one-year extension of a moratorium on principal repayments for CBN intervention facilities; strengthening of the Loan to Deposit Ratio policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers. Loans given to the private sector have risen by over 21 percent over the past year.
“Creation of N50 billion target credit facility for affected households and small and medium enterprises through the NIRSAL Microfinance Bank; creation of a N100 billion intervention fund in loans to pharmaceutical companies and healthcare practitioners intending to expand and strengthen the  capacity of our healthcare institutions; creation of a research fund, which is designed to support the development of vaccines in Nigeria; a N1 trillion facility in loans to boost local manufacturing and production across critical sectors. Regulatory forbearance was granted to banks to restructure loans given to sectors that were severely affected by the pandemic
“There was also the mobilization of key stakeholders in the Nigerian economy, which led to the provision of over N23bn in relief materials to affected households, and the set-up of 39 isolation centres across the country. The effect of these measures helped to contain a significant decline in GDP growth in the 2nd quarter of the year.”
He said many had expected the GDP growth to decline by 7.4 per cent, noting however that the impact of the CBN interventions helped to reduce the decline to 6.1 percent.
“This decline was less severe than the decline experienced in other economies such as the United States, South Africa and India which saw significant declines in growth by 32 per cent, 52 per cent and 23 per cent respectively. We do expect that with the phase out of the lockdown measures, GDP growth in the third quarter will be much better than that of the second quarter, due to the impact of the measures being implemented by the monetary and fiscal authorities.”
Speaking on NESG’s concern on CBN development activities, Okorafor noted that NESG itself admitted that many Central Banks around the world are engaging in similar actions. 
“The CBN engaged in development finance in order to address the credit needs of the sectors critical to improving livelihoods, reducing poverty, and promoting inclusive growth. 
“These goals have become doubly important in light of the significant shocks to the economy following the ongoing COVID-19 pandemic. In pursuit of transparency, the CBN usually publishes disbursements made under these activities in our Economic Reports,” he said.
Okorafor said many ordinary Nigerians, including smallholder farmers, households and medium-scale entrepreneurs benefitted from such interventions, adding that N38.11 billion was disbursed as loans to 44,458 beneficiaries through the NIRSAL Microfinance Bank (NMFB). This number has risen to N59.12 billion; supporting 103,189 beneficiaries as of August 2020.
“It is important for the NESG to note that our intervention programmes in the agricultural  sector were a key contributor to the resilience of the sector during the crisis, as the sector experienced positive growth of 1.6 percent in the second quarter of the year despite the lockdown.
“As a result of the COVID-19 pandemic, Vietnam, Cambodia, India, and Thailand placed restrictions on the exports of critical food items, including rice and eggs. With these disruptions, the Nigerian economy could have faced a major food crisis, but for the government’s intervention programmes in the agriculture sector.
“Furthermore, by alluding to the fact that money cannot address constraints in the agriculture sector, the NESG failed to realise that access to credit is listed among the three major challenges faced by farmers and businesses in Nigeria. While the Federal 
Government is seeking to address issues such as access to electricity and logistic constraints faced by businesses, it was vital for the CBN to address an area that we had sufficient ability to impact upon, given the nature of the crisis we faced, which is improving the flow of credit to critical sectors of the economy” Okorafor stated.
He added that contrary to the NESG’s allegation that CBN’s lending process was devoid of a proper framework, it is important to note that recipients of intervention funds from CBN go through an expansive due diligence process through participating financial institutions (PFI), following which an additional assessment process is embarked upon by the CBN before  disbursements are provided.
“On the revisions to the BOFIA Act, there are many reasons why we see a total ignorance or  malicious intent on the part of the NESG. First, the provision they refer to as being currently  conceived as part of the new BOFIA already exists as Section 53 in the old Act, which is  now Section 51 in the amended Act passed by the National Assembly. The current bill has not proposed any changes to that section at all. Second, the provision of Section 51 does not purport to confer immunity on the Governor of the Central Bank of Nigeria like that which obtains for state governors. Rather, this provision protects the Federal Government, the Central Bank of 
Nigeria and their respective officials against adverse claims for actions or omission in good faith exercise of powers under BOFIA and other specified statutes including the Central 
Bank of Nigeria Act and regulations,” he added.
In pursuit of its mandate and its developmental function provided for in Section 31 of the CBN Act (2007), the bank has over the years intervened in critical sectors of the economy in order to safeguard the Nigerian economy like it did in 2016 to get Nigeria out of recession.
Due to the impact of COVID-19, the nation’s reserves are not being shored up as expected.
Before now, the CBN Governor, Godwin Emefiele, had warned of the possibility of the economy sliding into recession again unless appropriate complementary measures were taken by the monetary and fiscal authorities. 
According to experts, but for the efforts of the CBN Governor and his team, perhaps, the Nigerian economy would have been neck deep into recession by now, like some stronger economies.
Okorafor recalled that Emefiele and his team have established several intervention programmes such as the Anchor Borrowers’ Programme (ABP), Commodity Development Initiative (CDI), the Youth Entrepreneurship Development Programme, Agribusiness/ Small and Medium Equity Investment Scheme (AGSMEIS), the National Collateral Registry (NCR) and lately the Creative Industry Financing Initiative (CIFI).


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