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SBL28 - CBN Policies for and after the Pandemic

Welcome to SBL28 (Sycamore Business Lab): our periodic blog post where we address issues affecting you and your business.

On March 28 2020, we published an article on what the government was doing regarding the pandemic. In this article, we want to focus specifically on what the Central Bank of Nigeria (CBN) is doing.

The governor of the CBN Godwin Emefiele wrote an article in March 2020, titled “Turning the COVID-19 Tragedy into an Opportunity for a New Nigeria”

In the article, he outlined the policy responses the CBN would roll into three categories:

1. Immediate Term

The immediate term policies are the ones which will be implemented within 3 months. The initiatives implemented so far under this category are:

a. Ensuring financial system stability by allowing banks restructure loans of customers in affected sectors

b. Triggering banks and other financial institutions to roll out business continuity processes

c. Granting additional 1-year moratorium on CBN intervention funds, and reducing interest rates from 9% to 5%

d. Creation of a N50 billion credit facility for households and small and medium scale enterprises (SMEs)

e. Ensuring foreign exchange (FX) supply by directing oil companies to sell FX to CBN

f. Creating a N100 billion healthcare fund for hospitals, clinics and healthcare practitioners

g. Providing N1 trillion in loans to boost manufacturing

2. Short Term Policy Priorities

The short-term policies are the ones which will be implemented within 12 months. These will start to kick in when the transmission curve for the virus starts to flatten, and ongoing movement restrictions are eased. The key plans for this phase are:

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a. Support the manufacturing sector with financial interventions which support local manufacturing

b. Expand the financing of the healthcare sector to encompass all stages of the medical value chain in order to boost homegrown healthcare facilities

c. The establishment of InfraCo Plc, and infrastructure development vehicle with a capital of N15 trillion, which will be used for transport infrastructure across the country

3. Medium-Term Policy Priorities

These set of policies are to be implemented over a longer period of 3 years, as the world starts to normalise after the worst effects of COVID-19 have passed. The medium-term plan will focus on the four main sectors as follows:

a. Light manufacturing: To be supported with N500 billion intervention fund

b. Affordable Housing: To be supported with a fund for developers and assistance towards mortgage finance

c. Renewable Energy: With a focus on financing environmentally friendly energy production

d. Cutting Edge Research: By enabling medical and research institutions, as well as universities with the support they require rapidly expand their capabilities

The CBN appears to be on the right track if the proposed policies are implemented.

Conclusion

Do you think there is any key sector of the economy that has been left out? What are your own immediate, short and medium-term plans post the pandemic? We will love to know your thoughts.

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