In response to the Coronavirus pandemic that has left the global economy spiraling, Nigerian Central Bank, (CBN) Monday announced a six-points stimulus that will see a cut in interest rates from 9 to 5 percent per annum on all applicable CBN intervention facilities for 1 year effective March 1, 2020, in addition to a further moratorium of one year on all principal repayments.

Other measures are the Creation of an N50 billion credit facility, Credit support for the healthcare industry, regulatory forbearance, and strengthening of the apex bank’s Loan To Deposit Ratio (LDR) policy

It would be recalled that President Muhammadu Buhari summoned an emergency of the revenue-generating agencies last week to discuss ways out of the current economic slowdown occasioned by the coronavirus pandemic. The stimuli being announced by the CBN could be part of the interventions from the presidential committee comprising the Finance minister, Zainab Ahmed, CBN Governor, Godwin Emefiele, Federal Inland Revenue Service (FIRS) Nami Muhammad and the Group Managing Director, Nigerian National Petroleum Corporation (NNPC) Mele Kyari.

With the package, the apex bank is joining other central banks that have announced palliatives to curb the effects of the coronavirus pandemic which has devastated the global economy creating unprecedented disruptions in global supply chains, a sharp reduction in crude oil prices, turmoil in global stock and financial markets.

In the UAE, the regulator is planning a $27 billion economic stimuli to support banks and businesses in the country, where the outbreak is affecting major economic sectors such as tourism and transport, in a country where 85 has so far been affected.

Also, the Saudi Arabian Monetary Authority has also prepared a 50 billion riyal or $13.32 billion packages to help small and medium-sized enterprises (SMEs) cope with the economic impacts of coronavirus which has affected 105.

On Sunday also, the U.S. Federal Reserve announced another interest rate cut on Sunday – its second emergency measure this month.

Governor Godwin Emefiele told the media that all CBN intervention facilities are hereby granted a further moratorium of one year on all principal repayments, effective March 1, 2020, implying that any intervention loan currently under moratorium is hereby granted an additional period of one year. Accordingly, participating financial institutions are hereby directed to provide new amortization schedules for all beneficiaries.

The N50 billion credit facility that will come through the NIRSAL Microfinance Banks, according to the CBN is for households and small- and medium-sIzed enterprises (SMEs) that have been particularly hard hit by Covid-19, including but not limited to hoteliers, airline service providers, health care merchants, etc.

For the health sector also is credit support to meet the potential increase in demand for healthcare services and products, and Pharmaceutical companies intending to expand/open their drug manufacturing plants in Nigeria, as well as to Hospital and Healthcare practitioners who intend to expand/build the Health facilities to first-class centers. This is in addition to growing the size of existing interventions to the agricultural and manufacturing sectors in Nigeria.

Under the regulatory forbearance, the CBN extends grants to all Deposit Money Banks to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the outbreak of Covid-19 particularly Oil & Gas, Agriculture, and manufacturing.

The CBN noted that it would work closely with DMBs to ensure that the use of this forbearance is targeted, transparent and temporary, whilst maintaining individual DMB’s financial strength and overall financial stability of the system.

In view of the success of the LDR Policy in growing credit to the economy and reducing interest rates, the CBN would further support industry funding levels to maintain DMBs capacity to direct credit to individuals, households, and businesses, while additional incentives to encourage the extension of longer-tenured credit facilities would also be considered. DMBs, the apex bank noted are encouraged to continue to build capital buffers in order to improve the resilience of the sector.

The governor assured the apex bank’s readiness to provide further assistance as it monitors the situation to ensure that the economy stays afloat.

“The Bank stands ready to provide liquidity backstops as and when required in view of its role as Banker to the Federal Government and lender of last resort. The CBN shall continue to monitor developments and will issue further updates as may be appropriate.”

Nigel Green, the chief executive and founder of deVere Group, a financial advisor had earlier noted a growing consensus as governments and central banks scramble to try and limit the impact.

“Any way you look at it, it’s now almost certain that there will be a coronavirus-triggered recession as both global supply and demand are impacted.

“We can expect this recession to be deep but short. The slowdown will be temporary because it’s not caused by deep-rooted problems and imbalances in the economy, rather by a wholly unexpected shock that’s gripped the world.”

He continues: “Every recession produces a new world. This one will too.  “A Covid-19 recession is likely to fundamentally shift how we live, do business and invest.

“We’re moving towards an era of negative interest rates. The second cut of rates, now at zero, by the Federal Reserve – the world’s de facto central bank – suggests that the U.S. could soon join peers in Europe and Japan by adopting negative interest rates.

“Zero or negative rates will help boost financial asset prices and savvy investors will be seeking to top-up their portfolios by drip-feeding new money into the market at this time. They will give more investors more reason to increase their exposure to equities as the money won’t be working for them as cash deposits.”