The economy was yet to fully recover from the 2014 oil price shock, followed by the 2016 economic recession, and now on the brink of another plunge on account of the effects of the novel coronavirus (COVID-19) pandemic. Recession is a period of a significant decline in activities across the economy, characterised by low industrial production and manufacturing, high inflation, rising unemployment, falling purchasing power, low fiscal spending, as well as poor consumer spending, among others.
Indeed, the Central Bank of Nigeria (CBN), had reiterated that uncertain global economic events would shape the outcome of activities in Nigeria. These include global growth projections by experts and multilateral institutions; unfavourable outcomes of a trade war between the United States and China (both strategic to Nigeria); Brexit with its unfolding dynamics; a mix of crude oil price uncertainty; rising inflation associated with bilateral and domestic policies; and the mooted resource curse.
There were indications of an emerging variable that would distort the global economic order, including Nigeria. Of course, that was the beginning of the emergence of COVID-19, which is now a pandemic. The virus infection started from China, a strategic bilateral partner of Nigeria, but has now left the country and the monetary policy authority struggling to maintain price stability and economic growth. More worrisome is the fact that it is a global issue arousing mutual suspicions that are now bringing economic activities to a halt.
Majority of Nigeria’s imports come from China, just as in many other countries, but with the COVID-19 pandemic, China’s commercial and manufacturing cities have shut down activities in the fight against the spread of the virus. Also, products from the country are at risk of infection, including business visits; while demand for crude oil has fallen, leading to crash in global oil prices; with oil-dependent economies already in a fresh round of “sneezing”, including Nigeria.
Although the CBN is not losing sight of its responsibility to keep the economy going through its monetary policies interventions and offering of stimulus packages.
Chief amongst which include a-one year extension of moratorium on principal repayment of intervention facilities, and reduction of interest rate on such loans from nine to five per cent. There is also the creation of credit facilities for small and medium enterprises (SMEs) particularly those manufacturing pharmaceuticals as well as funding outlay of N1.1trillion for critical sectors of the economy to boost manufacturing and support import substitution activities.
The Apex Bank also announced a three-month repayment extension for beneficiaries of TradaMoni, FarmaMoni, and MarketMoni loans. As noble as these gestures are, experts insist that what is needed to reposition Nigeria’s economy post-COVID-19 is the discipline to implement policies that less-dependent on developments in the rest of the world.
A former President, Chartered Institute Bankers of Nigeria (CIBN), Prof. Joseph Ajibola, argued that Nigerians must tame their appetite to import basic items such as food and other consumables in the face of the dwindling foreign exchange earnings, and patronise home made goods if it must avert the imminent recession. He said prominence must be given to agriculture to assure food security, while local processing plants must be supported to produce home consumables.
According to Ajibola, the various incentives coming from CBN and other agencies of government must be faithfully implemented to harness the benefits. He said: “Micro/small/medium enterprises must be encouraged to drive the lower end of the economy. These initiatives put together will no doubt help to redefine the direction of the Nigerian economy, post-COVID-19 amidst the decline in the fortunes of the global oil market.
“Nigeria’s economy will be on a steady march to a virile state if the opportunities in the emerging sectors of tourism, hospitality, entertainment, arts and culture, information technology are well harnessed through well-articulated national orientation that focuses on those areas. And all the aforementioned have the potential to reduce the threat of economic recession staring the nation in the face. But everything depends on how prepared the country is to move away from mere talks show and really walk the talk.”
Although CBN’s monetary policy moves in recent years have been tagged, ‘panicky’ by some, especially since the turn of events in the twilight of 2014 till date, but developments thereafter have shown that foresightedness and discreetness are ingredients of public policy Nigeria’s huge debt profile at about N33trillion is now assuming more disproportionate weight against the country’s growth and development, thereby plunging it into perpetual borrowing.