The leadership of the Central Bank of Nigeria is leaving nothing to chance in its determination to avert another regime of a slide into recession.
All known authorities acquainted with Nigeria’s economic management and its direction since the outbreak of the COVID-19 have spoken, saying pointedly that the economy is heading towards a recession.
When it happens, not if, it will be the second time in barely five years that Nigeria will slip into this economic headwind that brings nearly all factors of production to a stand-still, putting manufacturing in reverse gear.
The first recession was recorded in 2016 and it took strident, dogged and suave moves by the Central Bank of Nigeria (CBN) about six months to reverse the situation.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, the International Monetary Fund (IMF) and World Bank Group have all spoken predicting that recession was lurking in the corner, not only in Nigeria, but indeed sub-Sahara Africa.
Mrs. Ahmed was more pointed, saying Nigeria will fall into its second recession in five years if drastic action was not taken to cushion the economic blow.
She estimated that the economy could shrink by as much as 3.4 per cent this year without a massive stimulus plan that should include, in her words, “billions in Central Bank, Federal Government and international support.
We need to do things that are very radical and very bold and very different and maybe, even unusual so that we don’t slip into a recession.” Mrs. Ahmed, told AriseTV pointedly that Nigeria’s “economy is in crisis.”
Just like the minister, the World Bank Group followed suit in its forecast, indicating that the global economy will shrink by 5.2 per cent that would result in the deepest recession since the Second World War.
According the International Bank for Development and Reconstruction, “ recession was lurking at the corner induced by the coronavirus pandemic resulting in deep slash in oil and commodities’ prices.”
Also, the IMF in its projection posited that “ Sub-Saharan African economies are projected to contract by 1.6 per cent in 2020” due to actions taken in response to COVID-19, including “the blanket lockdowns, curfews and closures imposed by governments to brake the coronavirus juggernaut.”
It added that “the GDP of the continent’s economic superpowers, Nigeria and South Africa, are expected to shrink by 3.4 per cent and 5.8 per cent respectively as a result of the pandemic which has crushed global demand and caused commodity prices to plummet.”
In its World Economic Outlook report, the IMF said the health crisis is “having a severe impact on economic activity,” projecting that the global economy would contract by 3.0 per cent this year – worse than during the 2008-2009 financial crisis.
Among emerging markets and developing economies, all countries face a health crisis which will have a severe impact on economic activity in commodity exporters,” said the report.
As the anticipated period for the manifestation of the recession regime draws near, attention is already being focused in the direction of the Central Bank of Nigeria, given its antecedents in the previous recession era.
The question being asked this time is – what additional steps the apex bank might take to fence-off the impending recession.
Make no mistake, the CBN has a long history of interventions in various sectors of the nation’s economy and has proven its mettle so far. This time, nothing less is expected.
CBN’s previous interventions
The success story of the Anchor Borrowers’ Programme (ABP) pioneered by the CBN is still fresh in the memory of the nation’s agrarian sector and its practitioners.
The ABP’s funding in collaboration with NIRSAL to boost agriculture, ensure food security and staving off hunger and starvation, the various funding provisions to aviation, manufacturing and low interest credit facilities to SMEs, among others, attest to the CBN’s readiness and preparedness to engage in fulfilling one of its core Development Finance mandates, going forward.
Staving-off recession
The CBN has already rolled out a stream of strategic measures to tackle the impending recession, leveraging on its previous experience garnered in 2016 when the first one broke.
Given the complexity of the COVID-19 induced economic imbroglio, the CBN, in its response, has also adopted multifarious approaches, incorporating health and finance remedial measures to mitigate and manage the impending development.
Knowing that small businesses and low-earning householders will be at the receiving end of the expected recession, the CBN, being sensitive and acquainted with the pivotal role MSMEs and SMEs play, coupled with the contributions of households as end- users of manufactured domestic products, has set aside N50 billion Targeted Credit Facility (TCF) to support this critical segment, in not just navigating the dreaded recession period, but coming out of it even stronger.
In addition, there’s a provision of N100 billion long-term credit facility for pharmaceutical concerns directed at research, manufacturing of ancillary drugs and medicaments.
The CBN package also includes a gamut of other provisions designed to impact on the nation’s derelict infrastructure, including power and electricity, health, roads and research, among others.
While the CBN holds its earlier interventions sacrosanct, it has equally promised to be proactive in responding to the developments around the coronavirus pandemic as they unfold.
At the monetary level, the apex bank has reduced interest rates, a critical variable affecting cost of capital required by manufacturers, either to procure raw materials, machinery, or as working capital.
The need to crash interest rates was strenuously canvassed by a wide segment of the society. The CBN’s response in cutting interest rates as canvassed by a critical segment of the society, is seen as a big credit to the bank.
The question of diversifying the economy away from oil remains key and central to overcoming any jerk in the economy, be it recession, or stagnation.
One major reason Nigeria suffers cyclical movement in revenue receipts, is its near total dependence on oil which accounts for nearly 90 per cent of federal government’s revenue, coupled with the fact that its price is susceptible to the vagaries of so many factors outside government’s control.
A diversified economy will create other revenue yielding sources from agriculture, mining, maritime, Information Technology, manufacturing and services, among several others.
Emefiele’s agenda
It ‘s with a view to addressing these shortcomings, repositioning the economy for greater performance and overcoming a slide into another economic headwind that Emefiele, is pushing for building a base of high-quality infrastructure, which he sees as the bedrock for any economy that desires to grow and be independent.
According to him, such qualitative infrastructure is not complete without reliable power, as that is the only way to engender industrial activity.
He is also pushing for cognate support for farmers, saying if operators in the agriculture sector lack adequate support, the nation would still be far from its inclusive goal.
“We need to make adequate support for both smallholder and large scale agriculture production in select staple and cash crops,” he said.
Among his offerings, Emefiele is calling the establishment of an Ecosystem of factories and supply chains, saying this will be strategic for the nation as they offer storage and provide logistics services to move raw materials to factories and finished goods to markets.
Affordable credit for SMEs
Emefiele considers the SMEs as the engine of every economy and their access to affordable credit determines their success. “We must facilitate access to cheap and long-term credit for SMEs and large corporates,” he said.
To expedite favourable global competition for Nigerian businesses, Emefiele has called for the development of venture capitalists to nurturenew ideas and engender local businesses, saying there is no justification why this should be out of our reach. “
We have the companies, manpower and some of the best brains in the world,” saying from America to Europe and elsewhere in the world, we have Nigerians driving global innovations in all fields.
He said now is “the time to seize this opportunity and create an environment that empowers our people to thrive within our own shores.”
The way out
In his opinion, Emefiele believes that what becomes of any nation’s lot in the current COVID-19 dispensation, will clearly depend on actions taken by the respective countries.
He said he does not see Nigeria’s position as precarious and extreme, pointing out that with adequate and strategic response, another recession can be averted. He captured his opinion when he spoke at the last Monetary Policy Committee meeting.
He said: All other economies that the International Monetary Fund (IMF) had at the meeting last October had predicted would help in accelerating global growth in 2020, have suffered unprecedented decline in output growth.
Luckily, and this was a pleasant surprise, Nigeria’s first quarter growth came down from 2.5 per cent during the fourth quarter of 2019, to 1.87 per cent during the first quarter of 2020. Nigeria is part of the global economy and naturally the economy would be impacted.
“But what is important is the extent we are able to manage this situation. There have been predictions of recession, but we think that as we ease the lockdown and begin to take actions to ensure that we move very fast out of the situation, get businesses back again, get the health sector back again, get our farmers to get back to the farm to conduct their planting and farming activities, we would be able to escape a recession.
“There are predictions that just like the global economy, Nigeria would slide into recession. But if we ease the lockdown as quickly as possible, get the businesses back as quickly as possible, those who may have suffered total disruptions in their business, we would make funds available to them, in the health sector, the SMEs, in the manufacturing sector, if we are able to make funds available to them as quickly as possible and at concessionary rates, and also give those who have existing loans in the banking sector an opportunity to restructure their loans, push forward their repayments, then it would be easy for us to get businesses back alive so as to increase production and save the country from recession.
“So, like you all know, the CBN has put in the market a N50 billion household and SMEs’ funds, out of which almost about N5 billion has so far been disbursed to almost 7,000 people.
We also have a N100 billion health and pharmaceutical sector facility, out of which more than N10 billion has been disbursed and we are hoping that more people would take advantage of these facilities,” he stated.- Culled from The Nation.
