By Arize Nwobu
THE global economy is sailing through stormy waters, no thanks to the COVID-19 pandemic which is threatening menacingly to totally shut down the economy. Social distancing has become the norm and production lines and factories are being shut down with a break in supply chains. Countries are on lock-down and imposing travel bans. Nigeria has banned flights from 13 countries, including USA, UK, China, Spain, South Korea and Switzerland. Others are France, Germany, Holland, Italy, Iran, Norway and Japan.
Global oil price has crashed to about $29-$30 and is likely to drop further. The Economic Advisory Council headed by Professor Dotun Salami, reportedly had recommended a revision of the 2020 Budget in view of the fall in crude oil price below the $57 benchmark for the budget. Central banks across the world are responding to the development by reducing policy rates to cushion the effect and stimulate growth.
For the Central Bank of Nigeria, CBN, as a pivotal financial institution in the management of the economy, it may not be out of place at this point in time to note that the apex bank has never been as challenged, aggressive and innovative as it has been under the present Governor, Godwin Emefiele who was reappointed by President Muhammadu Buhari in 2019 for a second tenure of five years. He was first appointed by former President Goodluck Jonathan, a development which is indicative of the level of confidence President Buhari has on Emefiele.
CBN under Emefiele faced a serious economic challenge in 2016 when the economy witnessed a recession which destabilised government revenue projections because of a drastic fall in global oil price. The development depreciated foreign reserves with attendant dollar scarcity which led to speculative trading on the green back and plunged the naira to an all-time low. Production was paralysed which resulted to waves of retrenchment by companies, including banks. CBN was on the spot with a barrage of criticisms, with some calling for reprimand of Emefiele.
But the Bank was resolute and introduced a number of innovative policy measures for demand management and supply of FOREX. The ace was the introduction of the Importers’ and Exporters’, I&E, FX Window which magically triggered dollar inflows to the economy and with sustained foreign exchange interventions by CBN, liquidity returned to the FOREX market and kick-started production. The economy pulled through the recession and returned to the path of growth.
GDP growth had remained in the positive territory for the 11th consecutive quarter following the recession. In the fourth quarter of 2019, GDP stood at 2.55 per which Emefiele noted to be the highest rate of quarterly growth attained since 2016 and surpassed the expectations of several analysts who had predicted a 2.2 per cent growth. The 2019 GDP growth stood at 2.27 per cent relative to negative 1.6 per cent in 2016 which Emefiele was attributed to the impact of both the monetary and fiscal policies.
The next challenge is COVID-19, a monstrous and pervasive challenge which has set the world on panic. Governments and major relevant institutions are shooting from all cylinders to as much as possible curtail the effects of the pandemic. CBN held a Roundtable Conference recently, with the theme, “Going for Growth” with the objective to interact and share thoughts on the economy with key stakeholders in the private and public sectors on the ways to promote greater economic growth.
The Governor noted that the impact of COVID-19 across 100 countries had affected global supply chains as well as demand for goods and services and crude oil prices had plummeted by over 45 per cent since January, 2020.
He further noted that CBN had already embarked on similar measures taken by other central banks across the world, which resulted in significant reduction of lending rates, as part of the apex bank’s efforts to boost growth and would not hesitate to deploy additional measures to strengthen the buffers and insulate the economy from the global headwinds.
Accordingly, CBN had cut interest rate on all of its intervention facilities from nine per cent to five per cent, effective March 1, 2020 and extended the moratorium before payment of principal on its intervention funds by one year. Other measures include the provision of N50 billion credit facility for households and SMEs, extension of intervention facilities and loans to pharmaceutical companies, hospitals and health care practitioners intending to expand or build their facilities to first class centres and restructuring of bank loans to businesses affected most by COVID-19 such as oil and gas, manufacturing and agriculture.
Nwobu, a Chartered Stockbroker and Business Journalist wrote via firstname.lastname@example.org