From Uche Usim, Abuja
The global economy has remained unstable since 2020 when the dreaded COVID-19 pandemic took the world by storm and vandalised supply chains through forced shutdowns and lockdowns.
While the pestilence may be over in many jurisdictions except China, many nations, especially developing climes like Nigeria, still ache from the pains of the pandemic.
According to the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, the continued weakening of the global economy in recent times, is due largely to the lingering disruptions to the global supply chain as a result of the Russia-Ukraine war, persisting global inflationary pressure and lockdowns in China. Other contributing factors include tightening global financial conditions, declining global trade, and increasing risks of a financial meltdown owing to the burgeoning global private and public debt portfolios.
“The ongoing monetary policy tightening by the US Federal Reserve Bank is also putting upward pressure on local currencies across the world, with pass-through to domestic prices, as investors exit these economies to seek higher yields in US dollar denominated fixed income securities”, Emefiele said at the last 287th MPC meeting.
Aside the Nigerian economy being badly hit by the ripple effect of the global crisis, the situation has been worsened by terrorism, banditry, unprecedented crude oil theft, spillover effects of Russian-Ukrainian war, naira free fall, ballooning unemployment, widening poverty, high inflation rate and huge sovereign debt, among other challenges.
Added to the catalogue of challenges is the risk of yet another global recession, which experts warn would be extremely damaging for fragile economies like Nigeria that are still confronted with the lag impact of the 2020 recession, with the concomitant huge capital flow reversals and tightening global financial conditions.
Nonetheless, to respond to the challenges of 2020, the Central Bank of Nigeria (CBN) designed a N9.3 trillion stimulus package and used various levers of economic management to administer it to states, companies and individuals.
While that simmered and appreciable growth experienced, it was soon retarded by the Russia-Ukraine crisis that reared its ugly head and disrupted business dealings between Nigeria and Europe.
The growth was also affected by high oil theft amid lower production volumes that robbed the country of huge foreign exchange at a time oil producing countries are enjoying a banquet.
Experts describe this as a deadly brew for a recuperating economy.
With inflation peaking at 20.52%, the CBN’s Monetary Policy Committee (MPC), in its 287th meeting penultimate Tuesday, increased the Monetary Policy Rate (MPR) by 150 basis points, from 14 to 15.5 per cent, as MPR is the baseline interest rate in an economy on which other interest rates within that economy are built on.
CBN’s CBN’s Director, Monetary Policy Department, Hassan Mahmoud, said the MPC got to a point where stringent measures had to be taken to control inflation. He said that the committee took cognisance of global and local economic issues in arriving at its policy decisions.
“We raised the MPR because it is necessary to do so. The quantity of money in the system was too much for the economy to absorb,’’ he said.
He added that monetary policy tools were meant to deal with short term risks, adding that the idea was to make the cost of funds expensive to drive down inflation.
According to Mahmud, the stimuluses that governments across the world provided for their citizens during COVID-19 increased the ability of people to spend, thereby, creating challenges with global supply.
“A lot of households and small businesses were injected with stimuluses; the U.S did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.
“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices go up,’’ he said.
He also blamed the Russian-Ukraine war and the resurgence of COVID-19 in China as responsible for the rise in global inflationary trend.
“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply.
“The war resulted in some shortages which made prices go up. Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he said
Already, the CBN has begun moves to recover the N9.3 trillion intervention facility extended to state governments, companies and individuals as a cushion against the devastating effects of the COVID-19 pandemic in 2020.
The Director, Development Finance Department of CBN, Mr Yusuf Yila, said while N3.75 trillion has so far been recovered from the N9.3 trillion, the apex bank would leave no stone unturned to recover the full money.
“Out of that figure, N5 trillion has not matured because we gave out some long tenor loans in the agriculture and manufacturing sectors and would take some years to mature,” he said.
Yila warned those with the erroneous assumption that the loans were grants and cash gifts, to immediately perish such thoughts because relevant levers of loan recovery structures were being pressed to ensure that the money was totally recovered.
According to him, the security agencies like the Economic and Financial Crimes Commission (EFCC) have been enlisted to galvanize debtors to pay up, while the Global Standing Instructions (GSI) has also been activated.
“For the States, we debit them directly at FAAC. For the over N1 trillion facility under the Anchor Borrower’s Programme, we have recovered N400 billion so far.
“All loans must be paid back. No mercy. We’re working with EFCC to set up a desk to recover the loans. It’s like a revolving scheme and when people pay back, we can give to others. These are loans not grants, including the Targeted Credit Facility. We will chase debtors to recover the money to the last kobo.
“Good thing we have the individuals BVN and we always track monies that move in and go out their accounts. When money comes in, we’ll mop it up.
“We’re slowing down on intervention programmes not to dump too much liquidity into the economy”, Yila explained.
He also advised bank customers who notice unauthorised deductions to report to the apex bank as such was not allowed.
The CBN intervention facility is captured under various parts.
Under the Real Sector Facility, the Bank released the sum of N66.99 billion to 12 additional projects in manufacturing and agriculture. Cumulative disbursements under the Real Sector Support Facility (RSSF) currently stood at N2.10 trillion disbursed to 426 projects across the country.
Furthermore, under the 100 for 100 Policy on Production and Productivity (PPP), the Bank disbursed the sum of N20.17 billion to 14 projects in healthcare, manufacturing, and services, bringing the cumulative disbursement under the facility to N93.39 billion to 62 projects. In the healthcare sector, N4.00 billion was disbursed to two (2) healthcare projects under the Healthcare Sector Intervention Facility (HSIF), bringing the cumulative disbursement to N130.54 billion for 131 projects, comprising of 32 pharmaceuticals, 60 hospitals and 39 other services. Under the Export Facilitation Initiative (EFI), the Bank funded several commodity projects in the non-oil export segment for value-addition and production to the tune of N3.24 billion, aside the N50.00 billion disbursed through the Nigerian Export Import Bank (NEXIM).
In the Micro, Small and Medium Enterprise (MSME) sector, the Bank supported entrepreneurship development with the sum of N39.26 million under the Tertiary Institutions Entrepreneurship Scheme (TIES), bringing the total disbursement under this intervention to N332.43 million. Under the Intervention Facility for the National Gas Expansion Programme (IFNGEP), the Bank disbursed N1.00 billion to support the adoption of Compressed Natural Gas (CNG) as the preferred fuel for transportation and Liquefied Petroleum Gas (LPG) as the preferred cooking fuel.