‘CBN’s N1.11 trn structured lending, major source of funding FG’s stimulus package’

There are indications that the Central Bank of Nigeria (CBN) will provide the bulk of funding for the federal government’s planned stimulus package of N2.3 trillion.

This is contained in the Nigeria’s Economic Sustainability Committee (ESC) plan in response to COVID-19.

Following the health and economic emergencies caused by the COVID-19 pandemic, President Muhammadu Buhari established the Economic Sustainability Committee (ESC) on March 30, 2020.

The committee in its report noted that given Nigeria’s low level of revenues and the importance of monetary stability, “we settled for a stimulus package of N2.3 trillion, which raises the question: How will this be funded?

“This amount will be funded by N500 billion from Special Accounts, N1.11 trillion of CBN structured lending and N302.9 billion from other funding sources.”

The time-tested approach to fighting a recession is a stimulus package. The size of the stimulus package according to the committee will usually determine how shallow or deep the recession would turn out to be.

It explained that the National Bureau of Statistics was asked to give a model of what the macro implications of four scenarios would be if the committee had the good fortune for oil prices to average at $30 per barrel in 2020.

“Scenario 1 is with no stimulus, i.e., if we simply stick to our budget the economy will decline by minus 4.40 per cent at best. Scenario 2: With a stimulus of just N500 billion, the economy will decline by minus 1.94 per cent.  Scenario 3: With a stimulus of N2.3 trillion, the economic decline will be lower at minus 0.59 per cent. Scenario 4. With a stimulus of N3.6 trillion there will still be negative growth but only of -0.42per cent,” it stated.

The first pillar consists of Real Sector Measures, and comprises a mix of project and policy approaches, which focus on the creation of jobs across the fields of agriculture and agro-processing, food security, housing construction, renewable energy, infrastructure, manufacturing and the digital economy.

The aim is to safeguard existing micro, small and medium scale businesses while ramping up local productive capacity by encouraging opportunities for innovation in the various sectors.

The second, Fiscal and Monetary Measures, outlines steps that will be taken to maximise government revenue, optimise expenditure and enshrine a regime of prudence with an emphasis on achieving value for money.

The overriding objective is to keep the economy active through carefully calibrated regulatory interventions designed to de-risk the environment for local production and enterprise, galvanise external sources of funding, rationalise existing debt obligations and boost investments in strategic sectors affected by the COVID-19 pandemic, while supporting the financial viability of State Governments.

The third pillar is implementation. This is the key to the success of the plan. Each Minister will be responsible for supervising the implementation of plans situated in their Ministry through a ministerial implementation committee chaired by the Minister.

The Ministerial Committee will be responsible for ensuring synergy between stakeholders, especially the public and private sector. The committees shall also drive the execution of specific projects, coordinate the entire sectorial value chain and ensure resolution of bottlenecks impeding implementation. The Economic Sustainability Committee, which is an inter-Ministerial Committee, will be responsible for general oversight of implementation and will report to the President. Expenditure will be monitored through the National M&E Framework and the Budget Office of the Federation.

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