NESG Allegations: We are taking extraordinary measures to stabilize economy – CBN

Isaac Okorafor
Isaac Okorafor

By Anayo Ezugwu

THE Central Bank of Nigeria, CBN, has assured Nigerians that it has embarked on extraordinary measures in order to stabilize the economy from an extraordinary shock of COVID-19 pandemic. The apex bank says that it has taken steps to increase the flow of credit to critical sectors of the economy in order to enable faster recovery of the economy.

While reacting to the allegations by the Nigerian Economic Summit Group, NESG, the CBN said it is working to prevent the economic crisis from spilling into a major financial crisis. The apex bank, in a statement signed by Isaac Okorafor, director, Corporate Communication, CBN, said the bank had granted a year extension of the moratorium on principal repayments for CBN intervention facilities.

Okorafor explained that the bank has strengthened the Loan to Deposit ratio policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers. He said loans given to the private sector have risen by more than 21 percent over the past year.

“Other actions taken by the CBN 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 our healthcare institutions; and creation of a research fund, which is designed to support the development of vaccines in Nigeria.

“Others are a N1 trillion facility in loans to boost local manufacturing and production across critical sectors; regulatory Forbearance was granted to banks to restructure loans given to sectors that were severally affected by the pandemic; and mobilization of key stakeholders in the Nigerian economy, which led to the provision of over N23bn in relief materials to affected households, and the setup of 39 isolation centres across the country,” he said.

Okorafor, therefore, reminded the NESG that the Nigerian economy is not immune to global economic crisis occasioned by the outbreak of COVID-19 pandemic. “As we all are aware, the impact of COVID-19 on countries across the world resulted in a significant downturn in the global economy. Consequently, countries, including Nigeria were forced to impose lockdown measures in order to contain the spread of the pandemic. This action resulted in depressed economic activity in the first half of the year. Except for China and Vietnam, advanced, emerging and frontier market economies, all experienced significant negative growth in the first half of 2020, and some are currently in a recession.

“In response to these unfortunate events across the globe, central banks have embarked on measures aimed at stabilizing their respective economies by reducing lending rates, which declined to negative territory in several advanced economies, in addition to increasing the scale of their asset purchase programmes. Indeed, after reducing its Federal Funds rate to 0 percent, the US Federal Reserve Bank implemented a huge securities purchase programme, which included purchase of corporate bonds (including those below investment grades).

“The Reserve Bank also provided credit facilities to non-bank institutions, which included money market funds and corporations. The balance sheet of the US Federal Reserve in support of these activities increased by over $3 trillion, while the European Central Bank expanded its balance sheet by over $1 trillion. Furthermore, the Bank of England in an unusual move gave an open check to the UK Government in order to fund its recovery efforts.

“It is, therefore, pertinent to state that the Nigerian economy is not immune from these crises given the over 65 percent drop in commodity prices; disruptions in global supply chains and the unprecedented outflow of over $100bn of debt and equity funds from emerging markets between March and May 2020; in addition to the impact of the lockdown on economic activities. These activities resulted in an over 60 percent reduction in revenues due to the Federation Account, 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.”

– Sept. 10, 2020 @ 15:35 GMT |

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