Mr Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) has urged operators in the financial system to take up proactive steps in supporting growth and wealth creation of key sectors of the economy.
Emefiele made the call at the 13th Annual Banking and Finance Conference, organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.
The conference had “Facilitating a Sustainable Future: The role of Banking and Finance”, as its theme.
Emefiele said that COVID-19 had brought on several challenges to the economy and indeed the banking sector.
He said it, however, offered a unique opportunity to build a more resilient economy that is better able to contain external shocks, whilst supporting growth and wealth creation in key sectors of the economy.
“Proactive steps on the part of stakeholders in the banking and financial system in supporting the growth of sectors, such as Agriculture, ICT and Infrastructure, will strengthen our ability to deal with the challenges that have been brought on by COVID-19, and stimulate the growth of our economy,”he said.
The CBN governor noted that from a sectoral perspective, the COVID-19 pandemic, along with the restrictions on movement, had a significant effect on a wide number of sectors.
He said the closure of schools, hotels and restrictions on movement led to contractions in the Transportation (-49%), Accommodation(-40%), Construction(-32%) and Education (-24%) sectors.
Emefiele said that other sectors such as financial services and telecommunications grew by 28 and 18 per cent respectively.
He said that these sectors which have the ability to leverage on digital channels witnessed strong growth.
This, he said, was so, as Nigerians relied on these tools to communicate and to conduct business and financial transactions.
He said that the Agriculture sector continued to record positive growth (1.6%), supported by productivity gains in the sector, interventions by the government and improved demand for local produce.
Emefiele also said that restrictions on global travel by land and air, along with the slowdown in commercial activities, led to a significant reduction in the demand for crude oil.
According to him, these factors contributed to the 65 per cent decline in crude oil prices between January and May 2020.
” This decline in prices, along with OPEC reduction of our production quota, led to a significant decline in our foreign exchange earnings, along with a more than 60 per cent decline in revenues due to the federation account.
“Today, crude oil prices have recovered from its low of $19 in April 2020, but it is yet to return to pre-pandemic levels of over $60 in January 2020,” he said.
According to him, significant disruptions in domestic and global supply chains as a result of lockdown measures in key markets in Asia and Europe between March and May 2020, affected delivery of inputs and machinery to firms in Nigeria.
He said that this contributed to a slowdown in manufacturing activities (-8.8 percent).
Emefiele said that the impact of the pandemic and the resulting slowdown in economic activity led to a significant outflow of funds from emerging market economies.
He said there were uncertainties on the scale at which the virus could spread, and the impact it could have on economic activity, in the absence of a vaccine.
This, according to him, led investors to withdraw over $100bn worth of funds from emerging markets between February and April 2020.
Emefiele said that the funds withdrawn were subsequently invested in safe haven assets such as US treasury bills and the Japanese Yen.
He noted that the drop-in flows between February and April 2020 was unprecedented and surpassed the decline in flows witnessed during the Global Financial Crisis in 2008.
According to him, Nigeria was not exempted from the drop-in flows, as capital importation into the country declined from $6bn in Q2 of 2019 to $1.2bn in Q2 of 2020.
The apex bank governor said the drop in crude oil earnings as well as the drop in foreign portfolio inflows significantly affected the supply of foreign exchange into Nigeria.