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COVID-19 mitigation: Has Nigeria’s Central Bank done enough to protect the economy
As five more COVID-19 cases were confirmed in Nigeria on Wednesday, the government swung into action and made some swift reforms which include the reduction of petrol pump price – a N1.5 trillion cut in the 2020 budget and a travel ban on 13 countries with high COVID-19 infection rates. The Central Bank of Nigeria also announced a N1.1 trillion intervention fund to boost the economy. Adeoye Adefulu, Partner at Odujinrin and Adefulu and Kola Masha, Managing Director of Babban Gona both join CNBC Africa to discuss how these moves would impact some key sectors of the Nigerian economy.
Thu, 19 Mar 2020 12:28:02 GMT
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AI Generated Summary
- Swift reforms by the Nigerian government in response to COVID-19 include reducing petrol pump prices, cutting the 2020 budget by N1.5 trillion, and implementing a travel ban on high infection rate countries.
- The Central Bank of Nigeria announced a N1.1 trillion intervention fund to support the economy, with focus on sectors like agriculture.
- Concerns over the downward revision of Nigeria's oil budget benchmark from $57 to $30 per barrel due to volatility in oil prices, highlighting the need to reduce reliance on oil and diversify the economy.
As the world grapples with the unprecedented challenges posed by the COVID-19 pandemic, Nigeria, like many other countries, is facing tough decisions to protect its economy and citizens. The recent swift reforms implemented by the Nigerian government in response to the pandemic have sparked discussions about the adequacy of the measures taken. The reduction in petrol pump prices, a N1.5 trillion cut in the 2020 budget, and a travel ban on countries with high infection rates have all been key moves in combating the spread of the virus. Additionally, the Central Bank of Nigeria announced a N1.1 trillion intervention fund to support the economy. In a recent CNBC Africa interview, Adeoye Adefulu, Partner at Odujinrin and Adefulu, and Kola Masha, Managing Director of Babban Gona, shed light on how these measures are likely to impact key sectors of the Nigerian economy. Adeoye Adefulu commended the government's actions, highlighting the importance of swift intervention in times of crisis. He emphasized the need for more radical steps to address the challenges at hand. On the other hand, Kola Masha expressed optimism about the interventions made by the Central Bank of Nigeria, noting that they were proactive compared to responses in other countries. Masha specifically pointed out the adjustments made to interest rates and the moratorium on principal payments as positive steps. One of the critical adjustments discussed during the interview was the review of Nigeria's oil budget benchmark. With the oil price plummeting due to a demand-supply imbalance exacerbated by the COVID-19 crisis, there were talks about revising the benchmark from $57 per barrel to $30 per barrel. Adefulu supported the downward revision, emphasizing the need for a conservative approach given the volatile nature of oil prices. He underscored the necessity for Nigeria to reduce its reliance on oil and diversify its economy to mitigate future risks. Masha echoed similar sentiments, highlighting the vulnerability of Nigeria's economy to oil price fluctuations. The conversation then shifted to the impact on the agriculture sector, a pivotal industry that contributes significantly to Nigeria's GDP. Masha emphasized the importance of protecting the agriculture supply chain, especially with the upcoming planting season and the reliance on rain-fed agriculture. He highlighted the risks associated with disruptions in the supply chain, particularly for essential inputs like fertilizers and animal drugs. The Central Bank of Nigeria's interventions, including a 50 billion Naira fund announced earlier and a subsequent 1.1 trillion Naira intervention, are expected to support priority sectors like agriculture. Masha stressed the need for targeted efforts to safeguard the agricultural sector during this critical period. The interview also touched upon specific policies aimed at the agriculture sector, including interest rate reductions and moratoriums on existing loans. While details of sector-specific programs were still forthcoming, Masha highlighted the CBN's focus on protecting agriculture due to its significant contribution to the economy. The discussion concluded with a reflection on the impact of COVID-19 on Nigeria's economy and ongoing challenges in the global oil market. The recent decision by Nigeria's oil company, NNPC, to lower the PMS price from 145 to 125 was seen as a temporary relief for consumers. However, concerns were raised about the long-term sustainability of subsidy-driven pricing and the implications for the economy. The uncertainty surrounding future oil prices and the potential for subsidy increases were key areas of concern. As Nigeria navigates the economic uncertainties brought about by the pandemic, stakeholders and policymakers continue to assess the evolving situation and strategize for sustainable recovery. The focus remains on diversifying the economy, protecting key sectors, and ensuring resilience in the face of external shocks.
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