Nigeria’s economic group, CBN bicker over policies to curtail COVID-19 impact on Nigerians

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The Nigerian Economic Summit Group (NESG) and the Central Bank of Nigeria (CBN) are bickering over the impact of intervention policies by the government to check the negative effect of the coronavirus pandemic on the country’s economy and Nigerians.

While the NESG alleged some of the policies by the government, through the CBN, have not yielded sufficient impact on the economy, the CBN pushed back stoutly, saying measures adopted during the period saved key sectors of the country from being exposed to more severe devastation.

On Tuesday, the NESG sponsored a publication titled “Matters of Urgent Attention”, in which critical issues were raised spanning key policy interventions of the government and the CBN in the agricultural and other sectors of the economy.

The NESG is a non-partisan, non-profit group of private and public sector leaders representing key economic sectors committed to deliberate dialogue on the development, growth, performance, and future of the Nigerian economy.

Issues by NESG

In its publication, the NESG criticised some of the government policies, including those by the CBN, which it noted, failed to impact the country’s economy.

The NESG said in spite of the increased focus by the present administration on agriculture, the need to ensure zero hunger, and increased budgetary as well as disbursement of funds by CBN, the apex bank’s Anchor Borrowers’ Programme (ABP) has failed to halt hunger among Nigerians.

Noting that the issues transcend money, the NESG said it required a complete overhaul of the management and support for agriculture and related sectoral value chain.

Also, it expressed concern about the impact of the growing insecurity nationwide on the business environment and investment flows, resulting in the current food crisis, unemployment, poverty, increasing community clashes, rising bloodshed and a dearth of peace and tranquillity in the country.

On the impact of the recently enacted Companies and Allied Matters Act (CAMA) 2020 on businesses, the economic group said if properly implemented, it will boost the growth of the Micro, Small and Medium Enterprises (MSMEs).

The NESG faulted the CBN on its handling of foreign exchange transactions, loan disbursements (intervention funds) and price fixings without appropriate policy clarity, arguing this could be subject to abuses, manipulations and significant market disruptions, “reflective of a policy akin to crony capitalism.

“We therefore respectfully request the appropriate authorities to properly review this policy to restore credibility into our financial sector,” the group said.

On the concerns over the re-enacted’ Bank and Other Financial Institutions Act 2020, the NESG, drew attention to certain provisions that breach the Constitution and conferring immunity on CBN and its officials against judicial review.

The group called on the President to withhold his assent until the Bill was properly reviewed, amended and made fit for purpose.

CBN reacts

In its reaction, the CBN said its policies were measures taken to support the stability of the country’s financial system and enable faster recovery of the economy following the negative impact of the COVID-19 pandemic in Nigeria.

The CBN said its policies during the period were informed by the over 65 per cent drop in commodity prices; disruptions in global supply chains and the unprecedented outflow of over $100 billion of debt and equity funds from emerging markets between March and May 2020.

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These developments, the CBN said, led to over 60 per cent reduction in revenues to the Federation Account, a significant drop in foreign currency inflows, resulting in imported inflation due to the downward adjustments in the Naira/dollar exchange rate and a rise in inflation.

To stabilise the economy from an extraordinary shock, the CBN said it had to take extraordinary measures to increase the flow of credit to critical sectors of the economy, enable faster recovery of the economy and prevent the economic crisis from spilling into a major financial crisis.

Some of the measures, it said, included a one-year extension of a moratorium on principal repayments for CBN intervention facilities; strengthening of the loan to deposit ratio policy; creation of a N50 billion target credit facility for affected households and small and medium enterprises through the NIRSAL Microfinance Bank.

Other measures included the creation of an N100 billion intervention fund in loans to pharmaceutical companies and healthcare practitioners intending to expand and strengthen the capacity of our healthcare institutions; creation of a research fund to support the development of vaccines in Nigeria.

Also, the CBN said a N1 trillion facility in loans was established to boost local manufacturing and production across critical sectors; regulatory forbearance granted to banks to restructure loans to sectors affected by the pandemic.

The loan-to-deposit ratio policy, the CBN explained, resulted in a significant rise by over 21 in loans provided by financial institutions to banking customers in the past year, while mobilization of key stakeholders resulted in the provision of over N23bn in relief materials to affected households, and the set-up of 39 COVID-19 isolation centres nationwide.

Impact of other measures

The impact of other measures adopted by the bank included the provision of palliatives to individuals affected by the pandemic, increase in access to credit to critical sectors of the economy that were either high employers of labour or have the ability to create jobs at a fast pace, helped in containing a significant decline in gross domestic product (GDP) growth in the second quarter of the year.

CBN insists its development finance activities during the period positively impacted many ordinary Nigerians, including smallholder farmers, households, and medium-scale entrepreneurs across the country.

Specifically, the CBN said details published in its monthly economic report showed a total of N38.11 billion was disbursed as loans to 44,458 beneficiaries through the NIRSAL Microfinance Bank (NMFB), with the number rising to about N59.12 billion and support to 103,189 beneficiaries as of August 2020.

Besides, the apex bank said its intervention programmes in the agricultural sector contributed to the resilience of the sector during the crisis, resulting in a positive growth of 1.6 per cent in the second quarter of the year despite the lockdown.

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“As a result of the COVID-19 pandemic, Vietnam, Cambodia, India, and Thailand placed export restrictions on the exports of critical food items, including rice and eggs.

“With these disruptions, the Nigerian economy could have faced a major food crisis, but for the government’s intervention programmes in the agriculture sector,” the CBN said.

Faulting NESG’s argument that money cannot address constraints in the agriculture sector, the CBN drew attention to the listing of access to credit among the three major challenges farmers and businesses faced in Nigeria.

It said while the government sought to address the challenges of access to electricity and logistic constraints faced by businesses, CBN took up the responsibility to address the flow of credit to critical sectors of the economy.

On alleged improper lending framework, the CBN said all recipients of its intervention funds go through an expansive due diligence process through participating financial institutions (PFIs), with additional assessment process before disbursements.

On the BOFIA Act, the CBN pushed back on NESG’s observations, saying they were borne out of “total ignorance or malicious intent.”

“First, the provision referred to as being currently conceived as part of the new BOFIA already exists as Section 53 in the old Act, which is now Section 51 in the amended Act passed by the National Assembly. The current bill has not proposed any changes to that section at all.

“Second, contrary to their misleading anxiety and associated reportage, the provision of Section 51 does not purport to confer immunity on the Governor of the Central Bank of Nigeria like that which obtains for State Governors.

“Rather, this provision protects the Federal Government, the Central Bank of Nigeria and their respective officials against adverse claims for actions or omission in good faith exercise of powers under BOFIA and other specified statutes including the Central Bank of Nigeria Act and regulations made thereunder,” the CBN said.



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