Realising that the world would eventually find a way of containing the coronavirus (COVID-19) pandemic, the Central Bank of Nigeria (CBN) has created a response plan that could produce an economic transformation of the country, post-Covid-19.
Although the number of coronavirus (COVID-19) cases continues to head north worldwide, many countries have started outlining lockdown easing measures they put in place to curb the spread of the pandemic.
This clearly means that such nations recognise that a solution would eventually be found to the crisis, thus there is the need to start planning for a post-Covid-19 world.
Indeed, in his recent OpEd article entitled, “Turning the COVID-19 tragedy into an opportunity for new Nigeria,” Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, argued that the pandemic and the immediate response of many of the country’s trading partners suggest “it is now more critical than ever that we take back control, not just control over our economy, but also of our destiny and our future.”
Specifically, the CBN governor noted that in the wake of the pandemic crisis, countries have moved away from multilateralism and responded by fighting for themselves with several measures to protect their own people and economies, regardless of the spillover effects on the rest of the world.
Citing data from the International Food Policy Research Institute (IFPRI), he noted that about 37 countries had enacted various forms of food export restrictions in response to COVID-19.
He disclosed that Vietnam, the world’s third largest exporter of rice, suspended granting rice export certificates until it had “reviews domestic inventories,” while Russia, the world’s largest wheat exporter, announced a 10-day ban on the export of buck wheat and rice due to concerns over panic buying in local supermarkets.
According to Emefiele, the possibility of the pandemic continuing and resulting in countries shutting their borders and restricting food imports cannot be completely ruled out.
He said: “What if these restrictions become the new normal? What if the COVID-19 pandemic continues in a second wave or another pandemic occurs in which all borders are shut, and food imports are significantly restricted? What if we cannot seek medical care outside Nigeria and must rely on local hospitals and medical professionals? For how long shall we continue to rely on the world for anything and everything at every time?”
N3.5trn stimulus package
The CBN boss explained that it was due to the aforementioned reasons that the apex bank introduced a combined stimulus package of about N3.5 trillion in targeted measures to households, businesses, manufacturers and healthcare providers, noting that “these measures are deliberately designed to both support the Federal Government’s immediate fight against COVID-19, but also to build a more resilient, more self-reliant Nigerian economy.”
He further said: “We do not know what the world will look like after this pandemic. Countries may continue to look inwards and globalisation as we know it today may be dead for a generation. Therefore, as a nation, we cannot afford to continue relying on the world for our food, education and healthcare.
“The time has come to fully transform Nigeria into a modern, sophisticated and inclusive economy that is self-sufficient, rewards the hardworking, but protects the poor and vulnerable, and can compete internationally across a range of strategic sectors,” the CBN governor added.
To ensure that the stimulus package is effective and assists the Federal Government in achieving its goal of ensuring economic transformation of the country, Emefiele said the regulator developed a “Policy Response Timeline to guide our crises management and the orderly reboot of the Nigerian economy.”
Immediate-term policies
For instance, under the immediate-term policies, which it said was expected to last for a period of 0-3 months, the CBN said it immediately focused on supporting hospitals and pharmaceutical industry with low interest loans to immediately deal with the public health crises arising from the pandemic.
It also collaborated with the private sector Coalition Against COVID (CACOVID) to support the Presidential Task Force across its response, while mobilising palliatives for the poor and vulnerable.
According to him, “under this Immediate-Term Response, we have activated the following: Ensuring financial system stability by granting regulatory forbearance to banks to restructure terms of facilities in affected sectors; triggering banks and other financial institutions to roll-out business continuity processes to ensure that banking services are delivered in a safe social-distance regime for all customers and bankers; granting additional moratorium of 1 year on CBN intervention facilities; reducing interest rates on intervention facilities from 9 percent to 5 percent and creation of N50 billion targeted credit facility for affected households & SMEs.”
Other measures taken by the apex bank under its Immediate-Term Response, according to Mr. Emefiele, include Strengthening its Loan-Deposit Ratio (LDR) policy; improving its sources of FX supply by directing all oil companies (international and domestic) and all related companies (oil service) to sell FX to it(CBN) and no longer to the NNPC; providing additional N100bn intervention in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity; providing N1 trillion in loans to boost local manufacturing and production across critical sectors and promoting financial inclusion by ensuring the poor and vulnerable are able to access financial services to meet their basic needs.
Short-term policy priorities
According to Emefiele, the second phase of the Policy Response Timeline, dubbed, “Short-Term Policy Priorities,” which the CBN said was expected to last for a period of 0 -12 months, would commence as soon as the Federal Government determines that the country is making progress in its battle against the pandemic and begins to ease the restrictions [lockdown).
He said: “This will be the phase for repositioning the Nigerian economic space. As part of the lessons from the current pandemic, we must ensure that that our value-added sector, the manufacturing industry is strengthened.”
In this phase, Emefiele said the CBN would pursue policies, such as reinvigorating its financial support for the manufacturing sector by expanding the intervention all through its value-chain( for instance, the regulator will ensure that primary products sourced locally provide essential raw material for the manufacturing sector except where they are only available overseas); embark on a project to get banks and private equity firms to finance homegrown and sustainable healthcare services that will help to reverse medical tourism out of Nigeria and promote the establishment of InfraCo Plc, “a world class infrastructure development vehicle, wholly focused on Nigeria, with combined debt and equity take-off capital of N15 trillion, and managed by an independent infrastructure fund manager,” and continue to prioritize the provision of FX for the importation of machinery and critical raw materials needed to drive a self-sufficient economy.
Medium-term policy priorities
Similarly, the third phase of the Policy Response Timeline, “Medium-Term Policy Priorities (0 -3 Years),” would start, according to Emefiele, once the world wins the fight against the pandemic and the Nigerian economy fully reopens for business.
In this phase, the CBN Governor said the apex bank will “act quickly to enable faster recovery of the economy by targeted measures towards particular sectors that are able to support mass employment and wealth creation in the country.”
He explained that the CBN hoped to achieve this objective by focusing on four main areas, including, light manufacturing, affordable housing, renewable energy, and cutting-edge research.
He said: “The CBN will consider an initial intervention of N500 billion over the medium term, specifically targeted at manufacturing firms to procure state-of-the-art machinery and equipment and automated manufacturing models that would fast-track local production and economic rejuvenation, as well as support increased patronage of locally processed products such as cement, steel, iron rods, and doors, amongst several other products.
“The recent private sector investments in cement production, using enhanced technology and automated manufacturing models is a good example of the kind of economic renewal we will be pursuing in this phase. We will develop a thorough screening process and stringent criteria for equipment types that would qualify for funding under this phase,” he added.
Furthermore, in order to boost job creation, household incomes and economic growth, the CBN will focus on bridging the housing deficit in the country, by facilitating government intervention in three critical areas: housing development, mortgage finance, and institutional capacity.
He stated: “We will pursue the creation of a fund that will target housing construction for developers that provide evidence of profiled off-takers with financial capacity to repay. The current identification framework in the banking sector using the bank verification number (BVN) will be used to verify the information provided by the off-takers before the developer can access the funds.
“We will also be considering ways to assist the mortgage finance sub-sector as well as build capacity at the state levels for their land administration agencies to process and issue land titles promptly, implement investment friendly foreclosure laws and reduce the cost of land documentation, as this has remained a major inhibiting factor in the provision of affordable housing in the country.”
Also, he said the CBN would, over the next three years, support the financing of environmentally friendly energy production, “as this has a tangential long-term health benefits.”
“We will look at efforts to drive innovation and research in every sector, through our universities, research institutions, creative industry initiatives, and all other media of novelty and inventions,” he added.
As analysts pointed out at the weekend, the ongoing disbursement of the N50 billion targeted credit facility for affected households & SMEs, indicates that the CBN will stick to its policy response timeline. This also means that the apex bank’s N3.5trn stimulus package is likely to be effective in bringing about the nation’s economic transformation.
Last line
Indeed, one sector that will be hoping that the stimulus package is successful would be manufacturing.
According to analysts at CSL Research, “without a successful stimulus implementation, the manufacturing sector may be facing its worst year since the oil price crash.”
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