Continued from Wednesday, April 15, 2020
Immediate-Term Policies (0-3 Months)
In light of the fact that this crisis is an exogenous one thrust upon us without much warning, this phase reflects the government’s efforts at containment and mitigation. Although global cases are heading towards two million with over 123,600 deaths as of April 14, 2020, we now have 343 cases, of which 10 deaths and 91 recoveries have been recorded. With President Buhari’s continuing strong leadership, Nigeria can now test 1,500 persons per day in 12 Molecular Test Laboratories.
We believe that this strong leadership in travel restrictions, lockdown, social distancing, and other measures have been greatly effective to curbing the spread of the disease. More so, the Presidential Task Force and Nigeria Centre for Disease Control (NCDC) have helped the country stay ahead of the curve with increased testing capacity, provision of better-equipped isolation centres, and effective contact tracing.
Within this milieu, the CBN has responded in several ways, first by supporting hospitals and pharmaceutical industry with low interest loans to immediately deal with the public health crises; then by working with the private sector Coalition Against COVID (CACOVID) to support the Presidential Task Force across its response, while mobilizing palliatives for the poor and vulnerable.
Under this Immediate-Term Response, we have activated the following:
1) Ensuring financial system stability by granting regulatory forbearance to banks to restructure terms of facilities in affected sectors;
2) Triggering banks and other financial institutions to roll-out business continuity processes to ensure that banking services are delivered in a safe social-distance regime for all customers and bankers;
3) Granting additional moratorium of 1 year on CBN intervention facilities;
4) Reducing interest rates on intervention facilities from 9 percent to 5 percent;
5) Creation of N50 billion targeted credit facility for affected households & SMEs;
6) Strengthening the Loan-Deposit Ratio (LDR) policy, which is encouraging significant extra lending from banks;
7) Improving FX supply to the CBN by directing all oil companies (international and domestic) and all related companies (oil service) to sell FX to CBN and no longer to the NNPC;
8) Providing additional N100 billion intervention in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity;
9) providing N1 trillion in loans to boost local manufacturing and production across critical sectors; and,
10) Engendering financial inclusion by ensuring the poor and vulnerable are able, by all means necessary, through banks, microfinance, community and non-bank financial institutions, to access financial services to meet their basic needs.
Short-Term Policy Priorities (0 – 12 months)
As soon as President Muhammadu Buhari and the Health authorities determine our Coronavirus Transmission Curve is flattening and many of the ongoing restrictions are eased, this will be the phase for repositioning the Nigerian economic space. As part of the lessons from the current pandemic, we must ensure that that our value-added sector, the manufacturing industry is strengthened.
Accordingly, the CBN will pursue the following policies in this phase:
1) Reinvigorate our financial support for the manufacturing sector by expanding the intervention all through its value-chain. In most cases, we will ensure that primary products sourced locally provide essential raw material for the manufacturing sector except where they are only available overseas;
2) With the support of the Federal Government, the CBN will embark on a project to get banks and private equity firms to finance homegrown and sustainable healthcare services that will help to reverse medical tourism out of Nigeria. By offering long-term financing for the entire healthcare value-chain (including medicine, pharmaceuticals, and critical care), banks will work with healthcare providers to consolidate on the current efforts to rebuild our medical facilities in order to ensure Nigeria has world class affordable hospitals for the people of Nigeria and those wishing to visit Nigeria for treatment;
3) The CBN will promote the establishment of InfraCo PLC, a world class infrastructure development vehicle, wholly focused on Nigeria, with combined debt and equity take-off capital of N15 trillion and managed by an independent infrastructure fund manager. This fund will be utilized to support the Federal Government in building the transport infrastructure required to move agriculture products to processors, raw materials to factories, and finished goods to markets, as envisaged at the CBN Going for Growth Roundtable in March 2020; and,
4) Continue to prioritize the provision of FX for the importation of machinery and critical raw materials needed to drive a self-sufficient Nigerian economy.
Medium-Term Policy Priorities (0 – 3 Years)
Once the world returns to some new normal having tamed COVID-19 by a combination of vaccines and social distancing, and the Nigerian economy reopens fully for business, we will act quickly to enable faster recovery of the economy by targeted measures towards particular sectors that are able to support mass employment and wealth creation in the country. We will do so by focusing on four main areas, namely, light manufacturing, affordable housing, renewable energy, and cutting-edge research.
In manufacturing, for example, it is pertinent to note that Nigeria’s gross fixed capital formation is currently estimated at N24.55 trillion made up residential and non-residential properties, machinery and equipment, transport equipment, land improvement, research and development, and breeding stocks. Of this estimated value, machinery and equipment, which are the main inputs into economic production, are currently valued at only N2.61 trillion.
In order to pursue a substantial economic renewal, including replacement of at least 25 percent of the existing machinery and equipment for enhanced local production, we estimate at least N662 billion worth of investments to acquire hi-tech machinery and equipment.
Therefore, the CBN will consider an initial intervention of N500 billion over the medium term, specifically targeted at manufacturing firms to procure state-of-the-art machinery and equipment and automated manufacturing models that would fast-track local production and economic rejuvenation, as well as support increased patronage of locally processed products such as cement, steel, iron rods, and doors, amongst several other products.
The recent private sector investments in cement production using enhanced technology and automated manufacturing models is a good example of the kind of economic renewal we will be pursuing in this phase. We will develop a thorough screening process and stringent criteria for equipment types that would qualify for funding under this phase.
In order to boost job creation, household incomes and economic growth, we will be focusing our attention to bridging the housing deficit in the country, by facilitating government intervention in three critical areas: housing development, mortgage finance, and institutional capacity.
We will pursue the creation of a fund that will target housing construction for developers that provide evidence of profiled off-takers with financial capacity to repay. The current identification framework in the banking sector using the bank verification number (BVN) will be used to verify the information provided by the off-takers before the developer can access the funds.
We will also be considering ways to assist the Mortgage Finance Sub-sector as well as build capacity at the State levels for their land administration agencies to process and issue land titles promptly, implement investment friendly foreclosure laws and reduce the cost of land documentation, as this has remained a major inhibiting factor in the provision of affordable housing in the country.
Over the next three years, we will also support the financing of environmentally friendly energy production, as this has a tangential long-term health benefits. We will look at efforts to drive innovation and research in every sector, through our universities, research institutions, creative industry initiatives, and all other media of novelty and inventions.
In conclusion, I believe we must now envision and work toward a Nigeria with the cutting edge medical facilities to provide world class care to the sick and vulnerable; enable our universities and research institutions to provide the requisite education and training that is required to keep these ecosystems functioning sustainably and efficiently; and millions of Nigerians employed in meaningful and well-paying jobs. This is the Nigeria that we must aspire to build.
COVID-19 may have plunged us into a crisis of unprecedented proportions. But, as Winston Churchill once admonished, we must never let a crisis go to waste.
Godwin I. Emefiele is Governor of the Central Bank of Nigeria (CBN)