March 23, 2020

COVID-19: Bankers Committee directs oil firms to sell forex to CBN only

Economic challenges and CBN’s policies

Godwin Emiefele, CBN Governor

…Unveils credit, forex funding for 11 drug firms

…To engage correspondent banks, others on trade commitments

By Babajide Komolafe

The Bankers Committee yesterday directed that all oil firms and related companies should henceforth sell their dollars only to the Central Bank of Nigeria, CBN, and no longer to the Nigerian National Petroleum Corporation, NNPC.

The Committee, which comprise the top management of the CBN and Chief Executive Officers of Deposit Money Banks, DMBs, also resolved to   grant special forex funding and credit facilities to ten major pharmaceutical firms in order to exponentially increase local drug production so as to enhance the nation’s response to the coronavirus pandemic.

The Governor of Central Bank of Nigeria, CBN, Mr. Godwin Emefiele, disclosed this in a communiqué issued at a special meeting of the committee in Lagos to deal with the impact of the COVID-19 on the banking system and on the economy in general.

“Whether you are in the oil service industry or oil production – upstream, midstream or downstream, all oil related companies must sell their foreign exchange   (forex) to the CBN and no longer to the NNPC, for the purpose of funding the importation of petroleum products, given the new policy on price modulation,” Emefiele said.

Preserving confidence

Speaking further, Emefiele said the committee, in a bid to preserving confidence in the nation’s banking system and the economy, will engage correspondent banks, correspondent banks, trade creditors, trading partners regarding existing Letters of Credit (LC).

He said:  “It was resolved that the CBN and banking industry will collaborate at this critical moment with one coherent strategy to provide confidence to the customers, counter parties, the public and most importantly, put Nigeria first.

“The industry resolved that profit will not be the primary motive at this time. Rather, preserving confidence, financial stability and support for the economy will be the overring objectives.

“Engagements will be held with correspondent banks, trade creditors, trading partners regarding existing LC and trade commitments. The industry is committed to resolving these commitments in a comprehensive and orderly way. There will be transparent and open communication with all counterparties.”

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Stimulus measures will inject N3.5trn

Highlighting the various measures announced earlier by the CBN, to inject about N3.5 trillion into the economy to mitigate the impact of the COVID-19 pandemic, Emefiele said: “The committee further discussed the financial system’s implication and operationalisation of the policy measures earlier announced by the CBN including: Additional moratorium of 1 year on CBN intervention; Interest rate reduction on intervention facilities from nine percent to five percent;   Creation of N50 billion targeted credit facility for affected households and SMEs;   Granting Regulatory forbearance to banks to restructure terms of facilities in affected sectors; Strengthening the LDR policy which is encouraging significant extra lending from banks;

“Improving FX supply to the CBN by directing all oil companies (International and domestic) and all related companies (oil service) to sell FX to CBN and no longer NNPC; Activation of the N1.5 trillion InfraCo Project for building critical infrastructure;

“Additional N100 billion in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity;   N1 trillion in loans to boost local manufacturing and production across critical sectors;

Boosting local drug production

“The Committee has identified a few key local pharmaceutical companies who shall be granted Naira and FX funding facilities to support procurement of raw materials and equipment required to exponentially increase local drug production in Nigeria.” These include but are not limited to Emzor, Fidson, GSK. May & Baker, Unique Pharma, Swiss Pharma, Neimeth, Sagar, Orange Drugs, Dana Pharma”

Noting that the COVID-19 outbreak has caused disruption on global supply chains, Emefiele said the time has come for local firms to prioritise their imports and focus on local raw materials.

He said: “In view of the significant disruption of the global supply chain, the bankers committee advises Nigerians and companies to begin prioritising their import needs and focus more on sourcing raw materials and inputs locally.”