CBN intervention represents 3.5% of Nigeria’s GDP —Emefiele

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…Analysts to be more constructive

…Urges banks to increase lending to agric, ICT, infrastructure

By Kayode Tokede

The Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele has disclosed that the apex bank cumulative intervention during the COVID-19 pandemic represent about 3.5 per cent of the nation’s Gross Domestic Product (GDP).

The National Bureau of Statistics (NBS) had reported that the nation’s aggregate GPD stood at N39.09trillion in nominal term in Q3 2020.

The CBN governor speaking at the 55th annual bankers’ dinner of the Chartered Institute Of Bankers of Nigeria (CIBN) on Friday in Lagos said the fiscal and monetary authorities took unprecedented measures to prevent long-term damage to the growth prospects of the nation’s economy.

He noted that the first objective was to restore stability to the economy by providing assistance to households and businesses that had been severely affected by the pandemic.

He added that, “In addition, we sought to stimulate economy activity through targeted interventions in critical sectors such as agriculture, manufacturing, electricity and construction. Cumulatively our intervention efforts represent about 3.5 per cent of Nigeria’s GDP.

He highlighted that some of the measures include, “Strengthening of the Loan to Deposit ratio policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers.

“Creation of N150 billion Targeted Credit Facility (TCF) for affected households and small and medium enterprises through the NIRSAL Microfinance Bank.

“Already, N149.21 billion has been disbursed to 316,869 beneficiaries. Given the resounding success of this program and its positive impact on output growth, we have decided to double this fund to about N300 billion, so as to accommodate many more beneficiaries and boost consumer expenditure which should  positively impact output growth.

“The Bank also disbursed Agri- Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) (N92.90 billion to 24,702 beneficiaries), Anchor Borrowers Program (ABP) by the sum of N164.91 billion to 954,279 beneficiaries.

“Nigerian economy through the Coalition against COVID-19 (CACOVID), which led to the provision of over N28bn in relief materials to affected households, and the set-up of 39 isolation centers across the country.

“Creation of a N100 billion intervention fund in loans to pharmaceutical companies and healthcare practitioners intending to expand and strengthen the capacity of our healthcare institutions; so far 60 health care related projects are being funded to the tune of over N60 billion as a result of the intervention.

“Establishment of a N1trillion facility in loans to boost local manufacturing and production across critical sectors; 53 major manufacturing projects, 21 agriculture related projects and 13 service projects are being funded to the tune of over N360 billion from this facility.”

Speaking on the impact, he said, “these measures along with the removal of restrictions on movement and resumption of international travel, led to improvement in key indicators of the economy, as several economic activities returned to positive growth.”

According to him, as a result of these measures, GDP growth in the third quarter, improved to -3.6 per cent from -6.1 per cent in quarter two, even though the economy fell back into a recession.”

He disclosed that the nation’s economy would emerge from the recession by the first quarter of 2021, due to high frequency data that indicates continued improvements in the non-oil sector of our economy.

He stated that the CBN instituted measures in the banking system, in order to prevent an economic crisis from spilling over into a financial crisis.

According to Emefiele “Inaction on our part would have led to a wave of bankruptcies by firms along with rising unemployment, which would ultimately have a significant impact on the balance sheet of banks. As a result, we ensured that; Banks made adequate capital provisions to cover for unexpected losses; We supported viable businesses that had been affected by the pandemic through access to our intervention funds

“We enabled banks to restructure loans granted to sectors affected by the pandemic.

“While the news of the continued growth in the banking and finance sector in the third quarter of the year is encouraging, the ultimate strength of our financial system would depend on three key factors; Ensuring that banks have adequate capital buffers to withstand similar pandemics.

“Developing adequate internal controls that will be able to identify potential risks to banks, such as cyber threats, as well as putting in place measures to contain these risks and being able to adapt your business model to changes taking place in the business environment.”

“This last point is vital as COVID-19 has demonstrated the impact externally induced disruptions could have on the Nigerian economy. It is therefore imperative from an economic as well as a security perspective, that the banking and financial system works to support growth in sectors that have significant growth potential, and can enhance the resilience of the Nigerian economy, in the face of external shocks.”

Speaking outlook, he said “With sustained implementation of our intervention measures, we do expect that the Nigerian economy could emerge from the recession by the first quarter of 2021.

“We also expect that growth in 2021 would attain 2.0 percent. However, downside risks remain, as restoration of full economic activities, particularly in service related sectors, remains uncertain until a COVID vaccine is produced and made available to millions of people across the world.

“Second, with the significant rise in cases in advanced markets and the imposition of lockdowns in parts of Europe, concerns remain on the impact this could have on growth in advanced economies, commodity prices and the financial markets.

“We must therefore find ways to insulate our economy from the impact of these shocks through our diversification efforts, while also working to ensure that we adhere to safety protocols in order to prevent a surge in COVID-19 related cases, as this could further cripple economic activities.

Given the fact that the rise in inflation is not due to monetary factors but rather the prevalence of structural rigidities and supply shocks, traditional tools of monetary policy may not be helpful in addressing current inflationary pressures. Rather, a more useful policy will be the supply-side measures implemented by the Bank. As a result, emphasis will be placed on strengthening the development finance initiatives of the CBN in order to stimulate greater production and reduce unemployment.

“We intend to increase our support for measures that will aid improve cultivation of local produce in Nigeria, with particularly emphasis on improving our yield levels, as food inflation continues to remain the key driver of inflationary trends.”

He maintained that the banking sector therefore has a significant role to play as a facilitator of “growth in the agriculture sector, through its intermediation function.

“Some of the opportunities in the agriculture sector that banks should explore include ways to address some of the existing gaps in the agriculture value chains, such as storage centers, transport logistics, and technology platforms, that can enable rural farmers to sell their produce directly to the markets.

“These measures would help to improve productivity of farmers, reduce post-harvest losses, increase access to finance for farmers and improve sourcing of local raw materials for processing by manufacturing and industrial firms.

“It will also aid improved production of local goods, enable the creation of jobs, while supporting the growth of other sectors of our economy such as manufacturing, and transportation.”

He assured Nigerians that the Monetary and Fiscal authorities are alive to their responsibilities to restore the economy back to recovery, warning media economic analysts to be constructive in their pungent criticisms.

In his words, “At this point, I would like to seize this opportunity to appeal to Nigerians, particularly our Media Economic Analysts.

“We confess that the problem we face today is of a global dimension. The global economy is challenged, just like the Nigerian economy.

“My appeal to our media analysts is that in the course of conducting their analysis of the Nigerian economy, they should realize that their public comments particularly if they are alarmist, create panic in our environment.

“We cherish their counsel but urge that they be more constructive in their pungent criticisms, which could hamper our efforts to return our country and economy back to recovery. When you overdramatize the problem, you create panic that slows the process of recovery.”