As many people are now aware, the outbreak of the Novel Coronavirus Disease (COVID-19) in China has rapidly permeated and profoundly changed the world.
While this crisis is first and foremost a public health issue, which has claimed the lives of over 123,600 people worldwide, and counting, the economic damages are unprecedented on several fronts: crude oil prices have declined dramatically to as low as $17 per barrel by the end of March, even before applying the discounts many oil exporters are offering; stock valuations for the NSE-ASI, Nikkei, Dow Jones and FTSE-100 have declined by an average of 23.8 percent between January and March 2020; global airlines have lost about $252 billion in revenues and across the broad range of industries from hospitality to services, the pain is growing.
These outcomes have expectedly thrown the global economy into a recession, the depth and duration of which is currently difficult to fathom. In fact, the International Monetary Fund (IMF) predicts that the global economy would decline by 3 percent this year.
Around the world, countries have moved away from multilateralism and responded by fighting for themselves with several measures to protect their own people and economies, regardless of the spill-over effects on the rest of the world.
According to the World Customs Organisation, a total of 32 countries and territories, adopted stringent and immediate export restrictions on critical medical supplies and drugs that were specifically meant to respond to COVID-19. As of April 10, 2020, an updated count of total export restrictions by the Global Trade Alert Team at the University of St. Gallen in Switzerland suggest a total of 102 restrictions by 75 countries.
On March 4, 2020, Germany announced an export ban that applied to all sorts of medical protection gear including breathing masks, medical gloves and protective suits. Around the same time, President Macron announced that France will requisition all face masks produced in the country, a de facto export ban. Between February 8, 2020 and April 6, 2020, India released eight different export notifications banning several drugs and medical supplies including hydroxychloroquine, ventilators, personal protections masks, oxygen therapy apparatus, and breathing devices.
On April 3, 2020, the Trump Administration invoked the war-era US Defence Production Act to stop major US mask manufacturer, 3M, from export of respirator masks, N95, to Canada and Latin America.
Fears of a long global recession have also led to worries about unprecedented global food insecurity, with concerns that agricultural production may be dislocated by containment measures that constrain workers from planting, managing and harvesting critical crops. Rather than seek cooperative and global solutions, several countries have resorted to export restrictions of critical agricultural produce.
According to the International Food Policy Research Institute (IFPRI), about 37 countries have enacted various forms of food export restrictions in response to COVID-19, even in countries where average production exceeds domestic consumption.
For example, Viet Nam, the world’s third largest exporter of rice, suspended granting rice export certificates until the country “reviews domestic inventories”. Russia, the world’s largest wheat exporter, announced a ten-day ban on the export of buckwheat and rice due to concerns over panic buying in local supermarkets.
What if these restrictions become the new normal? What if the COVID-19 pandemic continues in a second wave or another pandemic occurs in which all borders are shut, and food imports are significantly restricted? What if we cannot seek medical care outside Nigeria and must rely on local hospitals and medical professionals? For how long shall we continue to rely on the world for anything and everything at every time?
Although these developments are troubling, they present a clear opportunity to re-echo a persistent message the CBN has been sending for a long time, and at this time even more urgently so: we must look inwards as a nation and guarantee food security, high quality and affordable healthcare, and cutting-edge education for our people.
For a country of over 200 million people, and projected to be about 450 million in a few decades, we can no longer ignore repeated warnings about the dangers that lie ahead if we do not begin to depend largely on what we produce locally, because the security and well-being of our nation is contingent on building a well-diversified and inclusive productive economy.
When I became Governor of the Central Bank in June 2014, imports of rice, fish, wheat and sugar alone consumed about N1.3 trillion worth of foreign exchange from the bank. The immediate question that came to my mind was: can we not grow these ourselves? After all, only a few decades ago, Nigeria was one of the world’s largest producers and exporters of palm oil, cocoa and groundnuts.
Today, we import nearly 600,000 metric tonnes of palm oil, whilst Indonesia and Malaysia, two countries that were far behind us in this crop, now combine to export over 90 percent of global demand. In 2017, Indonesia earned $12.6 billion from its oil and gas sector but $18.4 billion in from palm oil. I believe that this pandemic and the immediate response of many of our trading partners suggest it is now more critical than ever that we take back control, not just control over our economy, but also of our destiny and our future.
In line with the vision of President Muhammadu Buhari, the CBN has indeed created several lending programmes and provided hundreds of billions to smallholder farmers and industrial processors in several key agricultural produce.
These policies are aimed at positioning Nigeria to become a self-sufficient food producer, creating millions of jobs, supplying key markets across the country and dampening the effects of exchange rate movements on local prices.
This philosophy has been a consistent theme of the CBN’s policies over the last couple of years. At the 2016 Annual Bankers’ Dinner, I challenged the bankers that we needed to take decisive actions to fundamentally transform the structure of our economy. Throughout that speech, I talked about the damaging effects of Nigeria’s unsustainable propensity to import, and opined that it was high time we looked inwards and stopped using hard-earned foreign exchange (FX) to import items that we could produce locally.
This determination, therefore, formed the bedrock of the bank’s policy, which restricts access to FX for importers of many items. These sentiments were re-echoed at the 2017 edition of the same Bankers’ Dinner, with specific examples of several companies that have benefited significantly from this policy of self-sufficiency. With President Buhari’s full support, we have continued to refine this policy to ensure that the best interest of Nigeria is served.
Many times, the bank has been accused of promoting protectionist policies. My answer has always been that leaders are first and foremost accountable to their own citizens. And if the vagaries of international trade threaten their wellbeing, leaders have to react by compelling some change in patterns of trade to the greater good of their citizens.
That is why in response to COVID-19, we are strengthening the Nigerian economy by providing a combined stimulus package of about N3.5 trillion in targeted measures to households, businesses, manufacturers and healthcare providers. These measures are deliberately designed to both support the Federal Government’s immediate fight against COVID-19, but also to build a more resilient, more self-reliant Nigerian economy.
We do not know what the world will look like after this pandemic. Countries may continue to look inwards and globalisation as we know it today may be dead for a generation.
Therefore, as a nation, we cannot afford to continue relying on the world for our food, education and healthcare. The time has come to fully transform Nigeria into a modern, sophisticated and inclusive economy that is self-sufficient, rewards the hardworking, but protects the poor and vulnerable, and can compete internationally across a range of strategic sectors.
In order to achieve this goal, we must begin immediately to support the Federal Government to:
1) Build a base of high quality infrastructure, including reliable power, that can engender industrial activity;
2) Support both smallholder and large scale agriculture production in select staple and cash crops;
3) Create an ecosystem of factories, storages, and logistics companies that move raw materials to factories and finished goods to markets;
4) Use our fiscal priorities to create a robust educational system that enables critical thinking and creativity, which would better prepare our children for the world of tomorrow;
5) Develop a healthcare system that is trusted to keep all Nigerians healthy, irrespective of social class;
6) Facilitate access to cheap and long-term credit for SMEs and large corporates;
7) Develop and strengthen pro-poor policies that bring financial services and security to the poor and the vulnerable; and
8) Expedite the development of venture capitalists for nurturing new ideas and engendering Nigerian businesses to compete globally.
India is in a position to ban exports because it is producing critical drugs and medical supplies that the rest of the world needs. It also has companies that are global champions, and even making mergers and acquisitions in advanced nations. Why should this be out of our reach?
We have the companies too; we have the manpower and some of the best brains in the world from the Americas to Europe and from Asia to Africa are Nigerians; driving global innovations in all fields. Nigerians are successful everywhere, and are already one of the most sought after immigrant groups in the United States.
But now is the time to seize this opportunity and create an environment that empowers our people to thrive within our own shores. To this end, the Central Bank has developed a Policy Response Timeline to guide our crises management and the orderly reboot of the Nigerian economy.
To be concluded
Godwin I. Emefiele is Governor of the Central Bank of Nigeria (CBN)