Governments and central banks in countries hit by the Coronavirus (COVID-19) pandemic are rolling out plans to contain the virus and keep their financial markets functioning. It is also appropriate that the Federal Government and the Central Bank of Nigeria (CBN) are responding to the emergency. Last week, the CBN unveiled a number of macroeconomic policy initiatives aimed at reducing the adverse economic impact of the health challenge to the economy. These interventions include the injection of N1.1 trillion across all critical sectors of the economy to boost local manufacturing and import substitution.
In addition, the apex bank announced N100billion loan to support relevant health authorities and the nation’s key laboratories, researchers and innovators to collaborate with global scientists to patent or produce vaccines and test kits in Nigeria. At the weekend, the CBN met with the Chief Executives of banks to work out the modalities of channeling the funds as well as ensuring access by local manufacturers.
The N1.1trillion economic support will augment earlier measures by the CBN to cushion the impact of the ravaging virus on the economy. The plans included an extension of one year on all moratoriums on all principal repayments due to the CBN from its intervention programmes, effective March 1, 2020. Others are interest rate reduction on all applicable CBN intervention facilities from nine per cent to five per cent, also effective, March 1, 2020. Among the CBN intervention programmes are the Commercial Agricultural Credit Loan scheme, the Anchor Borrowers’ Programme (ABP), and the Agric, Small and Medium Enterprises Scheme.
The new rate will apply to all these facilities. The Governor of the CBN, Godwin Emefiele, also announced the creation of additional N50billion credit support for healthcare targeted credit facility said to have been hit by COVID-19. This is to meet the increase in demand for healthcare services and products. The healthcare programme will also accommodate hospital and healthcare practitioners who intend to expand or build the health facilities to first class centres in addition to growing the size of existing interventions to the agricultural and manufacturing sectors of the economy.
Also, banks which are the disbursing agents for the several intervention funds got further forbearance as the CBN has granted them more time to restructure the tenor and loan terms for businesses and households affected by the virus. Undoubtedly, these policy initiatives are timely. There should be no room for excuses before the spread of the coronavirus overwhelms government’s effort. As the World Health Organisation (WHO) has warned, African countries should be prepared for the worst in containing the disease and its adverse impact on the economy. Therefore, no amount of economic relief or financial stimulus will be too much to mitigate the impact that has already seen the N10.55trillion 2020 budget cut by N1.5 trillion. The oil price has already fallen far below the budget benchmark of $57 per barrel. The implication is dire for the economy. We call for a coordinated effort by the fiscal and monetary authorities. In other words, the Federal Government’s task force and the CBN team should collaborate. Also, the seven-member committee set up by the Nigeria Governors’ Forum, to curb the spread of the virus, should strive to achieve the set goal.
We urge the CBN to review the foreign exchange window so as to reflect the present reality of the economy. At present, the difference between the two exchange windows, the parallel market and official rate, is widening. Whatever adjustment the government is making to contain the impact of the pandemic on the economy, there is need to have a realistic exchange rate. With headline inflation for the month of February at 12.2 per cent, the highest in over two years, and the likelihood of oil price dropping further, there is fear that the economy has little buffer package to lean on. Also, the performance of key sectors is not so good.
The macroeconomic environment suggests that the economy is yet to recover from the 2016 recession. Growth is still sluggish and weak to create employment opportunities for the unemployed. Under the present condition, it will be difficult to lift millions of Nigerians out of poverty. The coronavirus pandemic calls for creative edge on the part of policymakers to think out new strategies to deal with the crisis and grow the economy. Above all, let the government explore more ways to contain the economic impact of COVID-19 and generate enough revenue to buffer the effects of fluctuating oil prices.