Rising from the latest Monetary Policy Committee (MPC) meeting of Monday, 21st and Tuesday, 22nd September, 2020, the members stressed the urgent need for a combination of broad-based monetary and fiscal policy measures to curb the rise in inflation and contraction in output growth.
This, they highlighted, will involve targeted investment by the fiscal authorities to resuscitate critical infrastructure to improve the ease of doing business across the country.
In addition, the MPC believes the fiscal authorities can build on earlier efforts and articulate a clear strategy to attract private sector investment.
The committee assured that the Apex Bank will continue to take relevant steps to ensure that the detrimental risk of inflation to the economy is contained.
The Committee noted the various interventions by the CBN to reflate the economy, improve aggregate supply and drive down inflation.
Recent interventions were largely in the areas of Manufacturing, Agriculture, Electricity & Gas, Solar Power and housing constructions among others. It expressed optimism that these initiatives will significantly ease the adverse impact of the COVID-19 pandemic and set the economy on a path of recovery.
To buttress the point made by the MPC, the Deputy Governor, Corporate Services of the CBN, Mr. Edward Lamtek Adamu, at a seat-in/virtual seminar organized by CBN for Finance Correspondents and Business Editors in Lagos said: “I want to reiterate the strong commitment of the CBN towards supporting measures that would bring the nation from our over dependence of imported goods. So that we can create wealth, create jobs for our teaming youths and just improve the lives and livelihood of Nigerians as we strive to promote a very stable financial system.
“I want to emphasize what the CBN governor has consistently said. The Central Bank is committed to its core mandate of maintaining price and exchange rate stability. We are also committed to ensuring that we have a conducive macroeconomic environment for growth.”
He said the Apex bank is committed to fostering development for an efficient credible and reliable credit system, stable exchange rate, growing foreign exchange reserves and diversifying the economy.
The assurances could not have come at a better time, given the country’s race against an imminent recession.
The International Monetary Fund (IMF), therefore, remained cautious of its global growth forecast for 2020, which was hinged on the near-term two containment of the pandemic.
The likelihood of a second-round spike in the rate of infection is, however, undermining hopes of an early return to normalcy.
Oil exporting countries are also likely to face further revenue shortfalls as a result of the decision by OPEC+ to reduce its production ceiling from 9.6 million barrels per day to 7.7 million barrels per day.
Due to these headwinds, members of the MPC suspect that the global economy may suffer a deeper contraction in 2020 than the 4.9 per cent projected by the IMF. This may also dampen the projected recovery in 2021
So far, total disbursements from the Bank’s interventions in the wake of the COVID-19 pandemic amounted to N3.5 trillion including: Real Sector Funds, (N216.87 billion); COVID-19 Targeted Credit Facility (TCF), (N73.69 billion); AGSMEIS, (N54.66 billion); Pharmaceutical and Health Care Support Fund, (N44.47 billion); and Creative Industry Financing Initiative (N2.93 billion).
Under the Real Sector Funds, a total of 87 projects that included 53 Manufacturing, 21 Agriculture and 13 Services projects were funded. In the Health Care sector, 41 projects which included 16 pharmaceuticals and 25 hospital and health care services were funded.
Under the Targeted Credit Facility, 120,074 applicants have received financial support for investment capital. The Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) intervention has been extended to a total of 14,638 applicants, while 250 SME businesses, predominantly the youths, have benefited from the Creative Industry Financing Initiative.
In addition to these initiatives, the CBN is set to contribute over N1.8 trillion of the total sum of N2.30 trillion needed for the Federal Government’s 1-year Economic Sustainability Plan (ESP), through its various financing interventions using the channels of Participating Financial Institutions (PFIs).
Also speaking at the seat-in/virtual seminar, The Director, Development Finance Department, Mr. Philip Yila Yusuf said that various intervention initiatives were apt and timely in ensuring food sufficiency in Nigeria as borders and international trade came to a halt during the peak of COVID-19.
Yusuf said: “The Commercial Agric Credit Scheme was to fast track food processing across the entire value chain and this has been our successful intervention.
“We’ve disbursed over 600billion and over 400billion has been paid back. It was given at 9 percent interest rate, but it has been reduced to 5 percent and it has been given to private sector players and also state governments and a lot of state governments have accessed it for either rice processing mills, cassava processing mills or to do large scale farming.”
He said: “Because of the protectionist mode that a lot of countries are going into, there’s an opportunity for us to properly diversify into agriculture. So, we need to produce more, especially around grains. We need to achieve national food security and we need to be able to start looking at how we can even begin to export for us to be able to earn forex, because there’s already a decline in the major forex inflow we get from oil.
“We really need to start looking at how we can ensure we have food self-sufficiency and also begin to export to earn more foreign exchange.”
He Further said the Anchor Borrower’s Program launched by President Muhammadu Buhari in 2015 to look at how the country can stimulate activities and give farmers access to finance has been largely successful, adding that “without the Anchor borrowers’ program especially since the pandemic, I can’t imagine what would be happening in Nigeria.”
He also said that as a response to the Covid-19 pandemic, the CBN in the medium term is focused on growth, job creation, agriculture and health.
Speaking to other sectors the apex bank have disbursed funds, too, he said: “Once the COVID started in China, what the leadership of CBN under Governor Emefiele did was to try and create different scenarios of how we would respond to the pandemic depending on how it affects Nigeria.”
We brought out a broad stimulus package worth about N3.5 trillion across SMEs, manufacturing and healthcare because Gov. Emefiele wanted activities to go on despite the lockdown and then health which has been at the peak issue, because our hospitals have not moved from basic provision of services to more advanced healthcare.”
“With 3.5 trillion, the first thing we did was to put in place a N50 million targeted credit facility through the national finance bank for households and SMEs.” As I speak to you, we have disbursed 72 billion to over 120,000 beneficiaries and Gov Emefiele has increased it from N50 billion to N100.”
“We also put in place 100 billion credit support for the healthcare sector. We provided them cheap access at 5 percent, through the deposit money bank to access the N100 billion set aside. As we speak, we’ve disbursed over 44 billion to over 40 projects.”
“We also looked at helping to domesticate our pharmaceutical and hospice-related activities.”
“We also set aside 1 trillion funds for our manufacturing sector; that’s where we have huge, significant employment- textile, housing, food and agro- processing etc and during the covid-19 period, we have disbursed over N200 billion to a wide range of people.”
Speaking to foreign exchange, he maintained foreign exchange would be available for importation of raw materials to boost the real sector.
He said: “And then, we will continue to prioritize the provision of foreign exchange for only the importation of critical raw materials that are brought in here are processed, so that we can keep the value addition in-house.”
The MPC had thus appealed to important economic stakeholders to take advantage of these intervention initiatives to help support a quick rebound in growth.
With persistent focus on activities meant to reverse the contraction, the MPC projects growth at positive levels in Q4 2020, or at the latest by Q1 2021, based on the anticipated positive results from the coordinated and sustained interventions by both the monetary and fiscal authorities.
These interventions include the coordinated response of the monetary and fiscal authorities to curtail the spread of the COVID-19 pandemic, reverse the downturn in the economy, improve sources of revenue in the non-oil sector and encourage the build-up of fiscal buffers.
The Committee noted its support for the various intervention programmes of the Bank towards stimulating production in the agricultural and manufacturing sectors to increase aggregate output and lower prices.