The attention of the Central Bank of Nigeria (CBN), has been drawn to a recent press
release titled “Matters of Urgent Attention” by the Nigerian Economic Summit Group
(NESG), which calls into question some of the measures taken by the CBN to support the
stability of our financial system and enable faster recovery of our economy, following the
negative impact of the COVID-19 pandemic on Nigeria.

As we all are aware, the impact of COVID-19 on countries across the world resulted in a
significant downturn in the global economy. Consequently, countries including Nigeria were
forced to impose lockdown measures in order to contain the spread of the pandemic. This
action resulted in depressed economic activity in the first half of the year. Except for China
and Vietnam, advanced, emerging and frontier market economies, all experienced
significant negative growth in the first half of 2020, and some are currently in a recession.
In response to these unfortunate events across the globe, central banks have embarked on
measures aimed at stabilizing their respective economies by reducing lending rates, which
declined to negative territory in several advanced economies, in addition to increasing the
scale of their asset purchase programmes. Indeed, after reducing its Federal Funds rate to
0 percent, the US Federal Reserve Bank implemented a huge securities purchase
programme, which included purchase of corporate bonds (including those below
investment grades). The Reserve Bank also provided credit facilities to non-bank
institutions which included, money market funds and corporations. The balance sheet of
the US Federal Reserve in support of these activities increased by over $3 trillion, while the
European Central Bank expanded its balance sheet by over $1 trillion. Furthermore, the
Bank of England in an unusual move gave an open check to the UK Government in order
to fund its recovery efforts.

It is therefore pertinent to state that the Nigerian economy is not immune from these crises
given the over 65 percent drop in commodity prices; disruptions in global supply chains and
the unprecedented outflow of over $100bn of debt and equity funds from emerging markets
between March and May 2020; in addition to the impact of the lockdown on economic
activities. These activities resulted in an over 60 percent reduction in revenues due to the
Federation Account, a significant drop in foreign currency inflows, which led to downward
adjustments in the naira/dollar exchange rate and a rise in inflation due to the exchange
rate pass through effect of imported inflation.

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