The Central Bank of Nigeria (CBN) yesterday unveiled six monetary stimuli to cushion the economy from an impending slowdown on the back of the coronavirus pandemic and oil price war. The CBN circular announcing the measures was released on Monday, 16th March 2020, ahead of its bi-monthly Monetary Policy Committee meeting scheduled to hold on 23rd and 24th March 2020. This move is in line with policy moves by global central banks in a bid to cushion their economies following the rapid spread of the coronavirus in Europe and the Americas, especially the United States. The stimuli include:
1. Extension of the moratorium on all CBN intervention facilities by one year effective from 1st March 2020.
2. Interest rate reduction on all applicable CBN interventions from 9% to 5% effective from 1st March 2020
3. Creation of an NGN50 billion credit facility directly targeted at households and small and medium-sized enterprises (SMEs) that have been particularly hit by COVID-19 but not limited to hospitality, leisure and health-related service providers.
4. Credit support for the healthcare industry.
5. Termed regulatory forbearance for deposit money banks to the end of restructuring their loan terms and tenor for businesses and households directly affected by the impact of COVID-19.
6. Strengthening of Loan to Deposit ratio policy to boost credit to individuals, households and businesses.
In our opinion, the move by the CBN is proactive in light of the weakening effect of the coronavirus epidemic on the Chinese economy and many economies in Europe and the United States, where businesses continue to close down in a bid to prevent the spread of the virus, and also the impact of the oil price war on crude oil-reliant economies including Nigeria. While the spread has so far been successfully tamed in Nigeria, the slowdown on the global economy will likely be felt locally, and the move by the CBN was designed to limit such impact. However, we emphasize that these policies are quite limited, and this is possibly due to the strains on the economy from the recent fall in crude oil prices and dwindling foreign exchange reserves. As such, more needs to be done by the CBN if the pandemic lingers in the global economy or if the virus begins to spread at a rapid pace in Nigeria.