The New Policy Set by the Central Bank of Nigeria to Support the Economy Amidst the Coronavirus Outbreak Does Not Support Digital Money
Following the increased spread of coronavirus, many countries are putting up various economic strategies to help protect the economic activity of its country for the good of its citizens and financial stability of the country.
This new policy comes ahead of Central Bank of Nigeria, CBN, Monetary Policy meeting on March 23 and 24.
Below are highlights of the communique issued by CBN :
All CBN intervention facilities are hereby granted a further moratorium of one year on all principal repayments starting from March 1, 2020.
Interest rates on all applicable CBN intervention facilities are hereby reduced from 9.0 percent to 5.0 percent for one year effective March 1, 2020.
CBN creates a N50 billion targeted credit facility through the NIRSAL microfinance bank for households and SMEs vulnerable to the COVID-19 pandemic.
The CBN also opens intervention facilities and loans to pharmaceutical companies looking to expand operations and setting up drug producing plants.
The CBN grants Deposit Money Banks leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households affected by the outbreak of COVID-19.
Strengthening of the CBN’s LDR policy to support credit growth. The CBN would further support industry funding levels to maintain DMB’s capacity to direct credit to individuals, households and other businesses.
It is no longer a news that the COVID-19 pandemic has impacted global supply chains creating a decline in catering for the rate in demand.
Moreso, it has negatively affected revenue generation, creating a set back in the flow of cash for companies vulnerable to the effects of the coronavirus outbreak.
Considering that the oil price has went down at the export market affecting the value of naira to united states dollar, more import companies are finding it difficult to import goods from China and also affecting the bitcoin market exchange rate to naira
These economic pressures have significantly increased the risk of an economic meltdown and a possible recession in the medium term.
At this point, many experts believe that the CBN’s policy response didn’t solve the key issues faced by the Nigerian economy from the COVID-19 outbreak.
The policies listed above as is introduced by the CBN didn’t address the issues being faced at the foreign exchange market but rather it is geared towards freeing up more liquidity into the financial system and settling debt pact for companies.
While CBN has earlier said that its market fundamentals doesn’t support naira devaluation, we are not expecting any major reaction from CBN on that because it has made moves to sanction exchanges/merchants looking to devalue naira.
Moreso, the policy doesn’t address the use of digital money to paper money encouraging social distancing and the use of digital money including cryptocurrencies.
It’s no longer a news that the federal government of Nigeria has on several occasion distanced itself from Bitcoin and the use if cryptocurrency saying that there is no set regulations yet for its use.
Additionally, the CBN’s regulatory forbearance on loan restructuring and SMEs due to the COVID-19 would further support startups and other digital banking platforms.
It will allow them to use the microfinance bank license including crypto and blockchain startups like Wicrypt that got around two million naira funding from the federal government.
All rights reserved. This material and any other digital content on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from DiutoCoinNews.