Assuaging Covid-19-induced Economic Pain
James Emejo assesses the recent responses by both fiscal and monetary authorities to the current threat posed by the outbreak and spread of the Covid-19 pandemic to the global and domestic economy
No doubt, the recent outbreak of coronavirus (Covid-19) pandemic has brought world economies to their knees with bleak future prospects and Nigeria is no exception.
As a result, the World Bank alongside other ratings agencies have had to consider a downward review of global growth potentials for 2020.
Since the outbreak last December in China, and subsequent spread to several parts of the world including Italy, United States, Germany, Britain, France among other European countries and Africa in particular, world economic fortunes have nosedived, sending both the domestic and global stock market crashing as well as global crude oil price, which went as low as $25 per barrel at a point.
The virus had also come with huge human cost, killing over 9,000 people globally while hundreds of thousands have been infected, a dire situation, which had led to major lockdowns in several parts of the world.
To contain the spread of the virus, several countries have further restricted international travels and curtailed movements while key sectors of the economy including aviation, manufacturing, tourism, financial services among others have shut down.
As a result, the Nigerian economy is currently in a dire situation given that it relies 80 per cent on oil revenues to survive. And with an economy, which is largely undiversified, it is only a matter of time before the full consequence of the outbreak is unleashed.
Given that the country also relies heavily on China and other European nations- all of which are currently battling the coronavirusfor its imports, there are further concerns that it is only a matter of time before cost- push inflationary pressures begin to manifest.
The situation is further compounded by the fact that Nigeria is also battling the Covid-19 outbreak, having been imported into the country by travelers. About 12 cases have so far been confirmed, leading to speculations that the country will soon be under lockdown to manage the crisis as some states had already shut down public and private school schools.
If anything, the Covid-19 outbreak has brought major strain on government revenues, especially Nigeria, which relies mainly on oil to finance its annual budget.
And as countries continue to reel out emergency intervention programmes to address the current situation, the Central Bank of Nigeria (CBN) last week unveiled a number of policy initiatives aimed at reducing the adverse impacts of COVID-19 pandemic on the economy, a development which was commended by analysts.
The apex bank further announced its decision to increase its intervention to boost local manufacturing and import substitution with the injection of an additional N1 trillion across all critical sectors of the economy.
The CBN’s intervention include an extension of the moratorium on the apex bank’s intervention programmes, interest rate reduction, creation of a N50 billion targeted credit facility and credit support for the healthcare industry. Others are strengthening the CBN’s Loan to Deposit Ratio (LDR) policy and regulatory forbearance.
The CBN Governor, Mr. Godwin Emefiele, had announced a moratorium of one year on all principal repayments, effective March 1, 2020, as well as interest rate reduction on all applicable CBN intervention facilities from nine per cent to five per cent per annum for one year effective March 1, 2020.
He said the total CBN intervention facilities through the Commercial Agricultural Credit Loan Scheme, the Anchor Borrowers’ Programme (ABP) and the Agric, Small and Medium Enterprise Scheme (AGSMEIS) among others are currently worth about N3 trillion and the new rate cut will apply to all facilities.
Emefiele further announced the creation of a N50 billion targeted credit facility through the NIRSAL Microfinance Bank for households and small- and mediumsized enterprises (SMEs) that have been particularly hard hit by Covid-19, including but not limited to hoteliers, airline service providers, health care merchants, among others.
He also unveiled some sort of credit support for the healthcare industry to meet the potential increase in demand for healthcare services and products in the country adding that the apex bank had extended its intervention facilities to provide loans to pharmaceutical companies intending to expand/open their drug manufacturing plants in the country.
The CBN boss, who particularly announced a fresh N100 billion loan to support the health authorities to ensure laboratories, researchers and innovators work with global scientists to patent and or produce vaccines and test kits in Nigeria, to prepare for any major crises ahead, had said the healthcare programme will also accommodate hospital and healthcare practitioners who intend to expand/build the health facilities to firstclass centres.
He said this was in addition to growing the size of existing intervention to the agricultural and manufacturing sectors in the country while there would be a regulatory forbearance for deposit money banks (DMBs) going forward.
Among other things, Emefiele, specifically said the CBN will immediately grant all DMBs leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the outbreak of COVID-19 particularly oil and gas, agriculture, and manufacturing.
The CBN palliatives was also followed by the federal government’s decision to reduce the official pump price of petrol from N145 to N125, in a move aimed at dousing the impact of the coronavirus outbreak which appeared to have crippled global economy with catastrophic impact on domestic economies.
Emefiele said the CBN’s response had become inevitable given that the COVID-19 pandemic was having significant adverse consequences for both the global and the