Nigeria’s Economic Group, CBN, Bicker Over Policies to Curtail Covid-19 Impact On Nigerians

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
tranquility 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.

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 stabilize 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.

“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.