Nigeria: Central Bank announces stimulus measures in March to combat Covid-19 impact
On 16–18 March, the Central Bank of Nigeria (CBN) announced a set of policy measures to counter the economic impact from the fast-spreading coronavirus. This comes against the backdrop of a collapse in international oil prices caused by a price war between Saudi Arabia and Russia and falling demand for crude, boding ill for the country’s fiscal and external positions given oil accounts for about 90% of the country’s foreign exchange earnings and most of its fiscal revenues.
The first set of measures unveiled on 16 March include a moratorium of one year on all principal debt repayments starting 1 March; cutting the interest rate on applicable central bank loans from 9.00% to 5.00% for one year; and creating a NGN 50 billion (about USD 163 million) fund to provide credit to households and SMEs that have been hard hit by Covid-19. In the face of a potential spike in demand for health services, the CBN will also channel credit support to the healthcare industry by providing loans to pharmaceutical and health companies that plan to expand or establish operations in the country.
Soon after, the CBN announced on 18 March it will inject NGN 1.0 trillion (about USD 3.25 billion) into manufacturing and import substitution across key sectors to further safeguard and stimulate the economy. Additionally, it will provide an NGN 100 billion (about USD 325 million) loan to the national health sector to prop up capacity in tackling the spread of Covid-19.
Meanwhile, the crash in oil prices prompted the Finance Ministry to plan a cut of at least NGN 1.5 trillion (about USD 4.9 billion) to its record NGN 10.6 trillion (around USD 34.5 billion) 2020 budget approved earlier in the year, as it was calculated on a price of USD 57 per barrel (pb) whereas now it is based on a worst-case scenario of USD 30 pb.
In short, despite the large stimulus plan announced by the CBN, significant risks have mounted on the short-term outlook. This, coupled with deep cuts in spending and decline in revenues, paint a grim scenario for the economy ahead at a time when it was only gradually beginning to recover from its 2016 recession.
The next central bank meeting is scheduled for 23–24 March.