Eyes on CBN as Nigeria battles worst recession


When Nigeria slipped into another recession in November 2020, it did not come as a surprise to economic watchers.

Rather, the fears were how to exit the economic crisis because the fiscal and monetary authorities were still nursing the pains of the shaky exit of the 2016 episode when COVID-19-induced lockdown, global supply chain disruptions and crashed crude oil prices reopened an unhealed wound.

The World Bank had predicted on June 25, 2020 that the aforementioned factors would plunge the Nigerian economy into a severe economic recession, the worst since the 1980s.

President Muhammadu Buhari also hinted of it during his presentation of the 2021 budget to the National Assembly on October 8, 2020. 

Prior to these scathing developments, the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, had on several occasions, warned on the dangers of relying on crude oil receipts (with its inherent volatilities) as the only economic life raft; rather than diversifying the economy and boosting export to earn foreign exchange.

He pointed to agriculture, mining, manufacturing, science and technology, ICT and other sectors as robust development enablers that could turn around the fortunes of Nigeria; while helping it reduce its debt burden currently standing at N32.2 trillion.

While the fiscal authorities seem highly addicted to crude sales, the CBN prefers to strongly support various ailing sectors of the economy, especially the Small and Medium Enterprises (SMEs) via intervention programmes, to realise its economic sustainability and diversification goal.

These interventions led to the exit of the 2016 recession, which was caused largely by weaker global oil prices; widespread and rising geopolitical tensions along critical trading routes in  the  world and normalization  of  Monetary  Policy  by  the  United  States’  Federal Reserve  System.

Again, in this latest episode, all eyes are on the CBN to tow the country out of the doldrums.

Interestingly, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed and the CBN Governor, Mr Godwin have, at different fora, assured that the second recession will be short-lived as Nigeria will get back to positive growth by the first quarter of this year.

On the fiscal wing, the Minister noted that the government has since developed an economic sustainability plan to cushion the effect of COVID-19 pandemic.

“Government will activate the economy by undertaking growth-enhancing and job-creating infrastructure investments in roads, rails, bridges, solar powers as well as communication technologies.

“Promoting, manufacturing and local production at all levels and advocating the use of made in Nigeria goods and services as well as creating job opportunities

“Achieving self-sufficiency in critical sectors of our economy and curbing unnecessary demand for foreign exchange which put pressure on the exchange rate.

“Extending protection to the very poor and vulnerable including women, persons living with disabilities through proper spending” she stated.

Although some economic watchers have expressed doubt over the possibility of exiting recession in the first quarter, they are, however, confident that the apex bank, will once again inject a cocktail of conventional and unconventional economic stimulation strategies to get things back on track like it did in 2016.

They insist that the apex bank seems to be the only government establishment, from the monetary policy wing, willing and ready to face the economic challenges headlong.

The Vice President and Head of the National Economic Council, Prof Yemi Osinbajo, at a recent forum emphasized that the government was committed to working in synergy with the private sector to foster equitable growth and boost national development.

Nonetheless, Emefiele is of the view that no part of the economy should be left vulnerable to shocks, even in a pandemic.

So far, under CBN’s economic intervention programmes, 2.59 million farmers have received N490.2 billion from the apex bank under the Anchor Borrowers Programme.

The 2.59 million farmers have cultivated 3,097,834 hectares of farmland across some commodities under the programme. The commodities are cassava, cotton, fish, groundnut, maize, poultry, rice, soya beans, wheat, cattle, sorghum, ginger, castor seed, sesame, tomato, cocoa, yellow pepper, oil palm, cowpea and onion. All intervention loans attract only 5% interest and some moratorium.

The Anchor Borrowers’ Programme, which was launched by President Muhammadu Buhari on November 17, 2015 in Kebbi State, has proven to be a game-changer in the financing of Smallholder farmers in Nigeria.

Experts say that the scheme has revolutionized agricultural financing and remains the fulcrum on which other agricultural transformation initiatives revolve.

More so, to deepen the presidential metering initiative, the CBN has disbursed N14.35 billion to electricity distribution companies to procure 263,860 meters for electricity consumers in the country.

Again, the bank disbursed N10 billion to revive at least 50 distressed companies in Kano that succumbed to the suffocating impact of the COVID-19 pandemic.

Since the outset of COVID-19 last year, the Central Bank of Nigeria gave a one-year extension of a moratorium on principal repayments for CBN intervention facilities. Others were; strengthening of the Loan to Deposit Ratio policy, which has resulted in a significant rise in loans provided by financial institutions to banking customers.

Loans given to the private sector, have risen by over 21 percent over the past year.

There was also the creation of N50 billion target credit facility for affected households and small

and medium enterprises through the NIRSAL Microfinance Bank. Other initiatives are the creation of a 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, which is designed to support the development of vaccines in Nigeria; a N1 trillion facility in loans to boost local manufacturing and production across critical sectors; regulatory forbearance was granted to banks to restructure loans given to sectors that were severely affected by the pandemic; mobilization of key stakeholders in the Nigerian economy, which led to the provision of over N23 billion in relief materials to affected households, and the set-up of 39 isolation centers across the country. The effect of these measures, which included provision of palliatives to individuals affected by the pandemic, increase in access to credit to critical sectors of the economy that are either high employers of labor or have the ability to create jobs at a fast pace, helped to contain a significant decline in GDP growth in the 2nd quarter of 2020.

More so, the CBN engaged in development finance in order to address the credit needs of the sectors critical to improving livelihoods, reducing poverty, and promoting inclusive growth.

The goals have become doubly important in light of the significant shocks to the economy following the ongoing COVID-19 pandemic. In pursuit of transparency, the CBN usually publishes disbursements made under these activities in its economic reports.

N38.11 billion was disbursed as loans to 44,458 beneficiaries through the NIRSAL

Microfinance Bank (NMFB). This number has risen to N59.12 billion; supporting to 103,189

beneficiaries as of August 2020.

According to Professor Uche Uwaleke, Nigeria’s first professor of the capital market, the overall objective of these interventions is to promote financial inclusion in the country, tackle unemployment, insecurity and other social challenges.

Other analysts also believe that the recession will be short-lived if CBN pursues its economic revitalisation agenda vigorously.

Some of the intervention schemes are; Non-Interest Guidelines for Accelerated Agriculture Development Scheme (AADS);

Non-Interest Guidelines for Intervention in Textile Sector; Guidelines for the operation of the Agri-business, Small and Medium Enterprise Investment Scheme (AGSMEIS) for Non-Interest Financial Institutions; Non-interest Guidelines for Non-oil Export Stimulation Facility; Non-interest Guidelines for Anchor Borrowers’ Programme; Non-interest Guidelines for Real Sector Support Facility Revised Guidelines; Non-interest Guidelines for the operation of the Credit Support for the Healthcare Sector, Modalities for the implementation of the Creative Industry Financing Initiative (Non-interest version).

Interestingly, the intervention schemes were designed with specific targets and purposes.

The AADS, for instance, is aimed at reducing unemployment in Nigeria by funding agriculture production initiatives that will engage as much as 370,000 youths over the next three years.

Similarly, the Non-Interest Guidelines for Intervention in Textile Sector is intended to resuscitate Nigeria’s textiles industry by providing “a N50 billion special mechanism for restructuring of existing facilities and provision of further facilities for textile companies with genuine need for intervention.”

On cotton production, 256,000 farmers had been engaged for the 2020 planting season through the CBN Anchor Borrowers Programme (ABP).

The CBN also said it was working hard to revive the Cotton Textile and Garment (CTG) industry to create jobs and boost the economy of the country as it did some decades ago.

Some of the eligibility criteria for accessing these non-interest schemes are that beneficiaries must be Nigerian youths within the ages of 18 to 35 years.

They are to sign an undertaking to abide by the terms of agreement of the scheme and meet other documentation requirements.

More so, any textile company with an existing facility in the books of Bank Of Industry (BOI) under the Cotton Textile and Garment (CTG) scheme is eligible to apply. Again, textile companies with existing facilities in DMBs/NIFIs can apply. Textile companies that are not participating under the SME/RRF can also apply.

Other non-interest guidelines issued by the CBN were for the Anchor Borrowers’ Programme: the Credit Support for the Health Sector;  Intervention in the Textile Sector; the Real Sector Support Facility (RSSF) revised guidelines (V3); the Real Sector Support Facility (RSSF) through CRR; Non-Oil Export Stimulation Facility (ESF) and the Creative Industry Financing Initiative (CIFI).

Beneficiaries of the facility, Who spoke with Daily Sun hailed the apex bank for its numerous interventions. Adanna Uchendu, a young graduate, told Daily Sun that she was a beneficiary of the CBN household loan under the Targeted Credit Facility (TCF) meant to cushion the effect of the COVID-19 pandemic.

“I saw the news in the media and I applied online. I was called for an interview and eventually, I was given. I got N400,000. It was indeed a dread come true because I’ve started a small food business in a makeshift place close to my house.

“I’m likely to pay back this loan in 18 months. I’m excited”  she said.

Another beneficiary, Kalu Okpi, said he got N350,000 TCF loan last month and used to buy additional tools for his automobile repair business.

“I added money and bought a diagnosing machine for the latest model of cars. It’s scarce in Dutse. I can now diagnose vehicles and make money from it. If the owner wants, I’ll repair the vehicle after the diagnosis but diagnosing alone is N10,000. I am very happy”, he said.

For Mercy Uzoma, the N190,000 she got from TCF came in handy to pay her rent.

“We were almost thrown out. My husband lost his job and rent became an issue. But the loan came and we’ve settled it. It’s N150,000. I’m a hairstylist and gradually, we’ll pay back the loan”.

Also hailing the apex bank for its interventions, the Presidents of the Rice Farmers Association of Nigeria (RIFAN)- Alhaji Alhaji Aminu Goronyo; National Cotton Association of Nigeria (NACOTAN) – Mr. Anibe Achimugu; Maize Association of Nigeria (MAN); Maize Association of Nigeria (MAAN) – Alhaji Bello Abubakar; and the Maize Growers, Processors, and Marketers Association of Nigeria (MAGPMAN) – Dr. Edwin Uche attested to the success of the CBN ABP, which they noted had enhanced the value chains of their respective commodities.

Speaking on the guidelines issued by the Bank, the Acting Director, Corporate Communications Department, Osita Nwanisobi said the establishment of the non-interest windows had opened more opportunities for eligible beneficiaries to be considered for funding under all the Bank’s initiatives.

The guidelines stipulate that each Non-Interest Deposit Bank (full-fledged or window) is to set aside 5% of its profit after tax (PAT) annually as contribution to the Fund. It added that each Non-Interest Deposit Bank is also to transfer its contribution to the CBN not later than 10 working days after the Annual General Meeting (AGM) of the participating bank.

Eligible activities under the Scheme are businesses across the agricultural value chain, covering production, inputs supply, storage, processing, logistics and marketing; MSMEs in the real sector including manufacturing, mining and petrochemicals; MSMEs in the service sector including information and communication technology (ICT) and the creative industry as well as other activities as the Central Bank of Nigeria (CBN) may determine from time to time.

According to the guidelines, financing under the Scheme will be for start-ups, business expansion or revival of ailing companies and shall be in compliance with provisions of BOFIA (1991) as amended and the principles underpinning operations of NIFIs.

On March 21, 2020 when Nigeria went into total lockdown with 22 confirmed COVID-19 cases, the apex bank responded by scaling up the economic stimulus package from N1.1 trillion to N3.5 trillion to ameliorate the pains of the scourge.

The decision was taken after Emefiele held an extraordinary meeting with the Bankers Committee.

In the same vein, the CBN created a special purpose vehicle called Coalition Against COVID-19 (COCAVID) to help pool funds from private sector players.

The CBN Governor, Emefiele, also released details of how the unveiled facilities would be accessed. It setup the financial markets situation room to monitor global markets and advise the Bank on adequate response.

He also advised all Deposit Money Banks and other regulated entities in the banking industry to trigger their business continuity plans to ensure that their staff and families are protected, and their operations remain largely undisrupted.

He further advised the banks to adhere strictly to the directives, advice, and notices from the Federal Ministry of Health, National Centre for Disease Control and other relevant government agencies on national response measures to COVID-19.

Recently, the CBN, in its efforts to guarantee food security, funded the value chains of nine commodities to the tune of N432 billion in the 2020 wet season.

Still on ensuring food sufficiency, the apex bank funded a separate 1.6 million farmers in the 2020 wet season across the country.

The move is consistent with CBN’s broader blueprint of stimulating growth in the agriculture value chain to ultimately guarantee food security in the country.

It also resonates with Emefiele’s pledge of running a people-oriented CBN.

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