Beyond the CBN’s economic stimulus

The funding package unveiled by the CBN Governor, Mr. Godwin Emefiele, after due consultations with relevant stakeholders – federal authorities and members of the influential Bankers’ Committee comprising the Chief Executive Officers of banks include, contribution of N1.5 trillion Infrastructure funding and N1 trillion intervention in all critical sectors of the economy.

Significantly also, the private sector has pledged to work with the Federal Government, and key development finance agencies, to mobilize close to N1.2 trillion from banks, pension funds and other financial institutions, to fund road, power, and port infrastructure.

This, we recall is in addition to a six-point first set of policies unfolded by the apex bank to cushion the negative impact of the virus on Nigerian businesses and the economy amongst which are the immediate cut on interest rates of all applicable CBN intervention facilities from nine per cent to five per cent per annum for one year as well as a further extension of the period of grace given businesses for the repayment of the loans by one year on all principal facilities, especially intervention loans. Both are effective March 1, 2020.

Furthermore, the CBN disclosed the creation of N50 billion targeted credit facility for small and medium scale enterprises, SMEs as well as households impacted by the COVID-19 pandemic that would boost local manufacturing and ensure import substitution in the economy in order to provide relief and generate more jobs to the teeming youths directly impacted by the deadly virus.

It also be noted and very commendable too that the package is  in addition to the N100 billion loan earlier approved in 2020 financial year, aimed at supporting the health institutions to ensure laboratories, researchers and innovators work with global scientists to produce vaccines and test kits in Nigeria to prepare for any major crises ahead.

Key pharmaceutical companies will also be granted some credit facilities and foreign exchange to support procurement of raw materials and equipment to boost local drug production among them Emzor, Fidson, GSK, May & Baker, Unique Pharma, and Swiss  Pharma. Others are Neimeth, Sagar, Orange Drugs and Dana Pharma under the proposal.

The support, also, would deepen local drug manufacturing, increase bed count in hospitals across Nigeria, funding of intensive care as well as in training, laboratory testing, equipment and research & development to further strengthen the nation’s healthcare system.

We strongly believe that the stimulus if implemented to the letter, will boost massive production in the real sector of the economy following the drop in public revenue earnings and the attendant cut in government expenditure on capital projects as fiscal and monetary interventions are inevitable if industrialists and manufacturers must take the desired lead to sustain the post recession recovery.

It is on record that the Gross Domestic Product, GDP expansion has remained positive for the past 11 quarters following growth enhancing monetary and fiscal measures put together by the federal government and largely driven by improvement in major sectors of the nation’s  economy such as agriculture, industry, oil and gas, as well as information and communication technology, ICT.

Regrettably however, since the outbreak of the COVID-19 first reported in Wuhan, China, in December, the global economy has witnessed a downturn with disruptions transcending all sectors and adversely affected supply chains, cancellation of international travels and events as well as restriction of movement between countries.

Besides, Nigeria and other resource-dependent nations clearly, have been worst hit, with the pandemic driving crude oil prices at the global market below approved $57 benchmark and estimates in Nigeria’s budget and the Federal Government reducing the N10.8trn 2020 budget by N1.5 trillion. The oil benchmark has also been reduced to $30 per barrel.

Given the size of the expected stimulus, we recommend that all hands must be on deck to ensure that Nigeria does not return to economic recession with relevant government officials and leaders of the organized private sector taking decisive steps and evolving disciplined management to accomplish set objectives while lending institutions should evolve innovative financing schemes that will require minimal collateral from farmers and SMEs which constitute engine of economic development.

Similarly, lending rates by banks to farmers, small businesses and manufacturers should be further lowered in addition with aggressive efforts at rebuilding our road, rail and power infrastructure to reduce the cost of doing business in Nigeria and accelerate economic growth.

We proffer strict monitoring and effective supervision of loans beneficiaries across the agricultural and manufacturing sectors as the funds must not be seen as their share of the national cake that should be squandered for the stimulus to make the desired impact.

Emefiele’s disclosure that six key commodities, palm oil, dairy, cassava, wheat, aquaculture and sugar for increased production and processing of these commodities which could lead to the creation of over one million jobs over the next two years is heartwarming just as the country has recorded substantial improvements in the cultivation and processing of key staple commodities such as rice, maize, cotton and tomatoes following past interventions by the CBN.

 The CBN intervention should be seen as a rare opportunity for full economic diversification after many years of rhetoric while the proposed creation of a special purpose vehicle, SPV that will work in collaboration with the federal government, and key development finance agencies to mobilize about N1.2 trillion in funds from banks, pension funds and other financial institutions, to fund road, power, and port infrastructure is imperative.

Apart from reducing government’s burden of financing infrastructure projects and enable the government to focus on funding other priority areas, it will also reduce the cost of transporting goods across the country for farmers, SMES and manufacturers and help improve our ability to attain double digit growth rates.

To further alleviate public sector heavy financial burden, the Federal Government should as a matter of national priority hands off payment of subsidy on premium motor spirit (fuel) for which N457 billion has been allocated in this year’s federal budget. The savings should be channeled to social welfare programmes to benefit less privilege members of society.

We call on the Revenue Mobilization, Allocation and Fiscal Commission, RMAFC to seize the opportunity of the dwindling oil revenue to immediately set in motion modalities for slashing the salaries and allowances of elected and appointed public servants at all levels of government in order to conserve the needed resources for the execution of development projects for the benefit of the masses who are currently feeling little or no impact of governance.