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Evaluating Nigerian govt’s response to economic impact of COVID-19

The Federal Government confirmed the first Coronavirus Disease (COVID-19) case in Nigeria on Feb. 27, 2020 in Lagos. It was the first to be reported in the country since the beginning of the outbreak in China towards the end of 2019.

Godwin Emefiele
Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN)

The COVID-19 pandemic created medical emergencies across the world, but it also impacted on social and economic lives of countries, which necessitated actions to fight its effect.

In Nigeria, it necessitated a total lockdown of key economic sectors. Private and public institutions were closed, and economic growth was stifled.

The country slipped into an economic recession in 2016, but it soon bounced back, and between 2017 and 2019 the economy had begun to show promising signs of recovery before COVID-19 came and slowed the progress.

This ultimately resulted to a second recession in November 2020. The pandemic impacted negatively on the oil sector, which is the mainstay of the economy, with both price and production quantity declining.

This made the finance ministry to announce that Nigeria would cut the size of its N10.6 trillion budget for 2020 due to low revenue. The spending plan was calculated on assumptions of crude oil price of $57 per barrel, but Brent crude hovered around $33 per barrel during this pandemic.

The drop in revenue from oil came with multiplier effects that reduced the value of the Naira and affected welfare of the ordinary Nigerians.

As an immediate response to save small businesses and also save jobs, the House of Representatives passed the Emergency Economic Stimulus Bill in March 2020 to provide support to small businesses and private citizens.

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Speaker of the House of Representatives, Rep. Femi Gbajabiamila, said that the aim was to prevent job losses and to allow ordinary Nigerians live their normal lives.

Gbajabiamila said that the bill primarily sought to grant companies a rebate on Companies Income Tax to the value of 50 per cent.

“This, we hope, will prevent large scale job losses in an already fragile economy and allow our people to carry on with their lives as best as possible in the event of a large-scale outbreak,’’ he said.

Observers believe that COVID-19 related economic interventions significantly squeezed Nigeria’s fiscal space and exposed the danger of the country’s sole reliance on oil.

CBN, on March 16, 2020 announced a N50 billion fund to combat the impact of the pandemic on the economy and allow banks to give their customers more time to repay loans.

The apex bank also cut interest rates on its loans from nine per cent to five per cent and announced a moratorium of one year on principal repayments of CBN intervention facilities.

It announced a N100 billion intervention fund in healthcare for pharmaceutical companies and healthcare practitioners to expand their capacity, and another N1 trillion in loans to boost local manufacturing and production across critical sectors.

CBN Governor Godwin Emefiele said that the various packages were directed at households and micro and small enterprises as well as pharmaceutical companies that wish o explore local production.

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“The health sector loan aims to support the health authorities to ensure that laboratories, researchers and innovators work with global scientists to patent or produce vaccines and test kits in Nigeria to prepare for any major crises ahead.

“The CBN stands ready to provide liquidity back stops as and when required in view of its role as banker to the federal government and lender of last resort,” he said.

Emefiele assured that given the continuing impact of COVID-19 on global supply chains, the bank would increase its intervention in boosting local manufacturing and import substitution.

The government also took practical steps to avert a looming food crisis by empowering farmers to embark on massive cultivation of food crops through the Anchor Borrowers’ Programme of the CBN.

CBN rallied agriculture stakeholders to a meeting in Abuja, in September 2020, and offered them incentives towards averting food shortage that could result from challenges posed by the pandmic.

Mr Yusuf Yila, Director, Development Finance Department of the bank, pledged the bank’s continuous support, adding that food security was an important priority of the government, which the CBN would work to ensure its success.

That initiative ensured availability of food in the country during the pandemic, even as some countries grappled with acute food shortages.

The government also set up a N500 billion intervention fund to enhance capacity of health facilities.

Minister of Finance, Mrs Zainab Ahmed, said that the fund would pull in cash as loans from various special government accounts and grants from multilateral institutions to be used to upgrade healthcare facilities at the federal and state levels.

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“Our general view is that this crisis intervention fund is to be utilised to upgrade health care facilities as earlier identified.

“The Federal Government also needs to be in a position to improve health care facilities not only at the federal level but also to provide intervention to the states,” she said.

Dr Obi Adigwe, Director General of the Nigeria Institute for Pharmaceutical Research and Development (NPPRD), urged the government to take advantage of the pandemic to improve capacity of research and development in relevant sectors.

`As bad situation creates wonderful chances, COVID-19 should create opportunity for increased funding into tropical and other diseases,” he suggested.

Though government’s various intervention schemes did not completely erase economic hardship experienced by ordinary Nigerians, they went a long way to ameliorate the situation and Nigerians fared relatively better.

As the pandemic enters its second wave and with the discovery of vaccines in some countries, Nigerians are concerned about the provision for procurement of these vaccines in the 2021 budget.

The Finance Minister, however, explained that the government was working on type and quantity of vaccines to be procured while her ministry and the ministry of health would finalise cost.

By Kadiri Abdulrahman

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