Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 11)

The Central Bank of Nigeria (CBN) has taken steps to ensure financial stability amid the COVID-19 pandemic. The steps include a reduction of interest rates for all CBN interventions from 9% to 5%, the creation of a N50 billion credit facility for households and SMEs impacted by the pandemic, and N100 billion in credit support to the healthcare industry3. Other policy actions were aimed at maintaining funding levels within deposit money banks in order to sustain lending capacity to the private sector. Overall, the CBN has committed over N1 trillion to support all critical sectors, which could help buffer the effect of a global recession4. While the fiscal stimulus package is in line with global best practice, it is critical to ensure that these interventions are not exploited. For instance, prospective beneficiaries may misconstrue these loans as grants; or may be unable to repay the loans leading to an enormous bad debt burden on the government. In addition, the extent to which these loans will reach certain businesses affected by the stay-at-home policy such as food vendors and artisans is debatable. However, MSMEs can utilize these interventions to boost local manufacturing and achieve import substitution in these industries.

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