An economic analyst has warned of the high risk of debt repayment outcome post COVID-19 among debtors, following the Federal Government’s N2.3 trillion stimulus package via the Economic Sustainability Plan and the Central Bank of Nigeria (CBN)’s N50 billion Targeted Credit Facility (TCF) as a stimulus package to support households and micro, small and medium enterprises (MSMEs) affected by the pandemic.
The analyst, George Nzebuka, an economist with High Breed Consult said this could brew high insolvency in businesses in the long term following the relaxation of the financial conditions for obtaining the loans since government was only focusing on the short term for the rebound of the country’s economy post COVID-19. He said Nigerians should brace up for mass seizures of many MSMEs businesses post COVID-19 over loan repayment defaults, which could be as a result of genuine business failures.
Nzebuka noted that the human tragedy and economic disruptions caused by COVID-19 had brought about recent surge in risk appetite in financial markets by business owners following palliative packages designed by the Federal Government and CBN to rescue affected businesses with credit.
The analyst stated that this has created an apparent disconnect between financial markets and economic prospects as investors seem to be betting that lasting strong support from CBN will sustain a quick recovery even as economic data point to a deeper-than-expected downturn, as shown in the World Economic Outlook Update that it will take a longer time for businesses to pick up in many global economies.