The Central Bank of Nigeria (CBN) has said it took critical and verifiable steps that ensured that the Nigerian economy did not spill into major financial crisis in the face of the global economic ravaging coronavirus pandemic.
The bank in a statement yesterday, also said it took steps to increase the flow of credit to critical sectors of the economy, in order to enable faster recovery of the economy. It frowned at the fact that such commendable efforts were not being appreciated by some critical stakeholders in the country.
The Central Bank of Nigeria (CBN) made the remarks while reacting to an earlier press release titled “Matters of Urgent Attention” by the Nigerian Economic Summit Group (NESG), which calls into question some of the measures taken by the CBN to support the stability of the nation’s financial system and enable faster recovery of the economy, following the negative impact of the COVID-19 pandemic on Nigeria.
The outbreak of COVID-19 has greatly impacted on countries across the world, resulting in a significant downturn in the global economy, including Nigeria’s.
“With these disruptions, the Nigerian economy could have faced a major food crisis, but for the government’s intervention programmes in the agriculture sector,” the CBN said yesterday in the statement that was issued by the bank’s director, corporate communications, Isaac Okorafor.
It highlighted some of the steps taken so far to include the one-year extension of a moratorium on principal repayments for CBN intervention facilities; strengthening of the Loan to Deposit ratio policy, which it said has resulted in a significant rise in loans provided by financial institutions to banking customers and the fact that loans given to the private sector have risen by over 21 percent over the past year.
Other efforts taken include: 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 the nation’s healthcare institutions; creation of a research fund, which is designed to support the development of vaccines in Nigeria.
According to the apex bank, a N1 trillion facility in loans was created to boost local manufacturing and production across critical sectors; while regulatory forbearance was granted to banks to restructure loans given to sectors that were severally affected by the pandemic, mobilisation of key stakeholders in the Nigerian economy, which led to the provision of over N23 billion in relief materials to affected households, and set up 39 isolation centers across the country.
“The effect of these measures which included provision of palliatives to individuals affected by the pandemic, increase in access to credit to critical sectors of the economy that are either high employers of labor or have the ability to create jobs at a fast pace, helped to contain a significant decline in GDP growth in the 2nd quarter of the year,” the CBN spokesman said.
“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 agricultural sector during the crisis, as the sector experienced positive growth of 1.6 percent in the second quarter of the year despite the lockdown.”
In the statement, the CBN noted that the Nigerian economy is not immune to the consequences of the pandemic given the over 65 percent drop in commodity prices; disruptions in global supply chains and the unprecedented outflow of over $100 billion of debt and equity funds from emerging markets between March and May 2020; in addition to the impact of the lockdown on economic activities.
According to the central bank, there has been an over 60 percent reduction in revenues due to the federation account, with a significant drop in foreign currency inflows which led to downward adjustments in the naira/dollar exchange rate and a rise in inflation due to the exchange rate pass through effect of imported inflation.
On border closure, the CBN said, “we are disappointed that the NESG has not shown any tendency to deeply interrogate the real reasons for the closure. While the CBN is not opposed to its reopening, we must never forget the real reason why that border was shut in the first place: significant economic sabotage involving smuggling of many fake products, drugs, small arms, and other goods.”
The bank noted that as a result of the COVID-19 pandemic, Vietnam, Cambodia, India, and Thailand placed export restrictions on the exports of critical food items, including rice and eggs.
Furthermore, by alluding to the fact that money cannot address constraints in the agriculture sector, Okorafor said NESG failed to realise that access to credit is listed among the three major challenges faced by farmers and businesses in Nigeria.