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Coronavirus

How labelled Covid-19 bonds can help to combat Coronavirus pandemic in Nigeria

A major challenge to Covid-19 action in Nigeria, like most other African countries, is scarce public finance.

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FBNQuest's, Covid-19,A Post-COVID Economy

Governments across the world are ramping up efforts to combat the Coronavirus pandemic. A major challenge to Covid-19 action in Nigeria, like most other African countries, is scarce public finance. Already, Nigeria’s revenue expectations and fiscal projections for the year 2020 has been drastically reviewed downward, largely due to oil price slump.

Overcoming a global health emergency like Covid-19 requires a whole lot of money. It is commendable the Central Bank of Nigeria-led Private Sector Coalition against Covid-19 (CACOVID) fund has grossed N25.8billion. CACOVID is combating Covid-19 by raising public awareness, supporting healthcare professionals, institutions and governments, and by mobilizing private-sector leadership and resources. This is in addition to Central Bank of Nigeria’s (CBN) combined stimulus package of about NGN 3.5 trillion in targeted measures to households, businesses, manufacturers and healthcare providers. These measures are deliberately designed to both support the Federal Government’s immediate fight against Covid-19, and build a more resilient, more self-reliant Nigerian economy.

Essentially, a significant share of the investments needed in the unfolding crisis would be from private finance components. Navigating the uncertain times and meeting the unprecedented financial commitment for Covid-19 pandemic demands a degree of innovation. One such innovation is labelled Covid-19 bonds.

As a recent innovation in sustainable finance, labelled bonds can be applied to any debt format, including private placement, securitization, covered bond, and Sukuk. As with conventional bonds, labelled bonds issue represented borrowed funds over a period, and investors or creditors receive a coupon with a fixed or variable rate of return. The main difference between them is the use of the proceeds.

(READ MORE: Essential steps companies and employees must take now to survive COVID-19)

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The Covid-19 pandemic is a social issue that threatens the world’s population both in terms of health and economic welfare; efforts and investments to combat the pandemic qualify for social treatment. Consequently, existing guidance related to social bonds is immediately applicable to efforts addressing the pandemic.

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For those who are interested in issuing social bonds to help combat Covid-19, the Executive Committee of the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines (the Principles), supported by the International Capital Market Association (ICMA), have advised that existing guidance for Social and Sustainability Bonds is immediately applicable to efforts addressing the Covid-19 crisis. In Nigeria, the guidelines are adapted in the Nigerian Green Bond Guidelines (GBGs) published by the Federal Ministry of Environment in 2016.

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Although beneficiaries of social bonds are usually specific groups, the pandemic nature of Covid-19 means a general population as whole may be targeted. The qualifying projects include Covid-19 related healthcare and medical research, and development of a vaccine; investment into additional medical equipment or manufacturing facilities to produce more health and safety equipment and hygiene supplies; specific projects designed to alleviate unemployment generated by the pandemic. Other qualifying uses of proceeds are: converting facilities into emergency and intensive care units; reconfiguration of healthcare services for Covid-19 treatment; staff costs, including training and salary of researchers; vehicles and transport equipment and buildings; IT and telecommunication systems and equipment, such as surveillance, diagnostics and modeling; and supply chain management, warehousing and storage facilities.

Progress has been made over the last month as the social bond market mobilizes to combat Covid-19. Many institutions are seeing the opportunity – from a financial and sustainability perspective – in issuing this kind of debt. It’s now the fastest-growing sustainable finance sector. The very first labelled Covid-19 bond issuance of USD 1 billion by the International Finance Corporation (IFC) was followed by a record-breaking USD 3 billion issuance by the African Development Bank (AfDB). In each case, the proceeds were earmarked for combating the pandemic.  Other labelled Covid-19 issuances include Council of Europe Development (CEB) EUR 1 billion issuance; the European Investment Bank SEK 3 billion issuance; the Inter-American Development Bank (IADB) USD 2 billion issuance; the Nordic Investment Bank USD 1 billion issuance; the Italian development bank Cassa depositi e prestiti EUR 1 billion issuance; Swedish medical supplier Getinge SEK1 billion issuance, etc.

(READ MORE: List of things you must accomplish during the Covid-19 lockdown)

The SEK 1 billion commercial paper issued by Getinge to exclusively finance increased production of ventilators and other capital needs to expand the production of life saving equipment to meet rising demand due to the Coronavirus pandemic shows that issuance of labelled Covid-19 bonds is not restricted to supranational organizations, multilateral development banks and investment banks. Any type of issuer, first-time or seasoned, can issue a labelled Covid-19 bond provided their evaluation is based on four core components: use of proceeds, project selection process, management of proceeds and reporting, as outlined in the ICMA Principles.

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These are critical times for Nigeria. As noted by the Governor of the Central Bank of Nigeria Godwin Emefiele: “countries around the world have moved away from multilateralism and responded by fighting for themselves with several measures to protect their own people and economies, regardless of the spillover effects on the rest of the world.” There is a unique opportunity to build on the experiences of past issuance of labelled bonds by the Federal Government, Access Bank PLC, and North-South Power Company Limited to do the heavy lifting in the fight against Covid-19. Considering Nigeria total debt profile at N33 trillion (after recent approval of additional $22.7 billion foreign loan by the National Assembly), issuances of labelled bonds by corporates in the country is desirable as the ongoing pandemic create several investment opportunities.

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Even as Covid-19 affects the stock markets, labelled Covid-19 bonds are veritable investment instruments for investors seeking to contribute to responding to the global disruption engendered by the Coronavirus pandemic in addition to achieving financial returns.

The Coronavirus pandemic is a new and immense challenge and we must all rise to the occasion. The reported cases of community transmission of COVID-19 by the Nigeria Centre for Disease Control (NCDC) underscore the need to observe all standard recommendations to prevent the infection. That is our first line of defence until the epidemic runs its course.


Oluwaseun Oguntuase writes from Lagos, Nigeria

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform. To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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Coronavirus

#EndSARS: FG expects increase in Covid-19 cases in the next 2 weeks

FG has warned that the ongoing #EndSARS protest may spark up a second wave of coronavirus.

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FG approves reopening of NYSC camps, extends tenure of PTF on COVID-19, FG commences process of resumption of international flight operations in weeks, COVID-19: Reactions trail FG travel ban on 13 countries

The Federal Government has warned that Nigerians should expect an increase in the number of Covid-19 cases across the country in the next 2 weeks.

This is due to the total disregard of the preventive measures against the virus during the ongoing nationwide #EndSARS protest which has been witnessing huge gatherings.

READ: Covid-19: CDC revises guidance, says virus can spread through airborne transmission

This disclosure was made by the Chairman of the Presidential Task Force (PTF) on Covid-19, who is also the Secretary to the Government of the Federation (SGF), Boss Mustapha, at the national briefing of the task force in Abuja on Monday, October 20, 2020.

He said despite the appreciable success recorded so far in the fight against COVID-19, the ongoing protest may spark up a second wave of the virus.

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READ: COVID-19: Spike in new cases suggests a looming second wave of the pandemic

Mustapha said, “I can say it authoritatively that with the ongoing protest across the country, in the next two weeks the cases of COVID-19 would have increased. Each and everyone that attended the protest and did not put up any form of protection is likely going to spread the virus. When people contract the virus during the protest gathering, they will go back home and spread it.

READ: 1 billion students in developing nations may be out of school due to second wave of COVID-19 – World Bank

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“This is one of the reasons why we must be extremely careful when we congregate because when you gather together in such an atmosphere where people don’t wear face masks or maintain the social distance you are creating a potential opportunity for carriers to spread the virus.

“So far we have done pretty well as a country but this protest is like a setback and we must avoid a situation where we will have a resurgence. Countries that thought they have overcome are dealing with the second wave. We are extremely lucky as a nation and we should be careful of any situation that can warrant the second wave.”

He said any mass gathering that does not adhere to the non-pharmaceutical interventions that have been put in place, like wearing of face masks, social distancing, and keeping personal hygiene, becomes a super spreader event.

READ: COVID -19: Nigerian companies have records of innovation to turn pandemic challenge to gold

What it means: With the expected spike in the number of Covid-19 cases due to these protests across the country, Nigeria runs the risk of having a second wave of the coronavirus outbreak which had before now been on a decline. This could lead to the resumption of lockdown measures by the government, in order to contain the spread of the pandemic.

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Coronavirus

COVID-19 Update in Nigeria

On the 19th of October 2020, 118 new confirmed cases were recorded in Nigeria

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The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 61,558 confirmed cases.

On the 19th of October 2020, 118 new confirmed cases were recorded in Nigeria, having carried out a total daily test of 11,794 samples across the country.

To date, 61,558 cases have been confirmed, 56,697 cases have been discharged and 1125 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 590,635 tests have been carried out as of October 19th, 2020 compared to 578,841 tests a day earlier.

COVID-19 Case Updates- 19th October 2020,

  • Total Number of Cases – 61,558
  • Total Number Discharged – 56,697
  • Total Deaths – 1,1125
  • Total Tests Carried out – 590,635

According to the NCDC, The 118 new cases are reported from 10 states – Lagos (51), Rivers (26), Imo (12), Osun (8), Plateau (6), FCT (5), Kaduna (4), Ogun (3), Edo (2), Niger (1)

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 20,696, followed by Abuja (5,923), Plateau (3,587), Oyo (3,415), Rivers (2,735), Edo (2,645), Kaduna (2,532), Ogun (1,983), Delta (1,812), Kano (1,741), Ondo (1,657), Enugu (1,313),  Kwara (1,050), Ebonyi (1,049), Osun (916), Katsina (904), Abia (898), Gombe (883).  Borno (745), and Bauchi (710).

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Imo State has recorded 610 cases, Benue (484), Nasarawa (478), Bayelsa (403),  Ekiti (329), Jigawa (325), Akwa Ibom (295), Anambra (275), Niger (274), Adamawa (248), Sokoto (162), Taraba (117), Kebbi (93), Cross River (87), Zamfara and Yobe (79), while Kogi state has recorded 5 cases only.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

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The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.

On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

 

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Coronavirus

China’s economy bounces back from COVID-19 slump, with a growth of 4.9% in Q3 2020

The Chinese economy has seen a growth of 4.9% between July and September, rising from the slump of the COVID-19 pandemic.

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Hudson Mining Limited, China's economy bounces back from COVID-19 slump, with a growth of 4.9% in Q3 2020

The Chinese economy has continued to show stronger recovery from the COVID-19 pandemic, as its economy saw growth of 4.9% between July and September – Q3 2020, compared to the same quarter last year. However, the figure is lower than the 5.2% projected by most international economists.

China is now leading the charge for a global recovery based on its latest Gross Domestic Product (GDP) data. The near 5% growth is a far cry from the slump the Chinese economy suffered at the start of 2020 when the pandemic first emerged.

READ: COVID-19: How CBN policies helped prevent the collapse of the Nigerian economy – Oscar Onyema

READ: TiKTok to take legal actions against President Trump’s ban

China’s trade figures for September also pointed to a stronger recovery, with exports growing by 9.9% and imports growing by 13.2% compared to September last year.

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It appears to be a broadening recovery with the important services sector rebounding. Domestic tourists and travelers have probably helped the recovery continue by spending their money at home because global restrictions mean they can’t yet go abroad. With international travel severely restricted, millions of Chinese have been traveling and spending domestically.

READ: OECD reduces global economic decline to 4.5% from earlier forecast of 6% 

What you should know

  • While the COVID-19 pandemic has hampered the year’s growth targets, China remains in a trade war with the US and it has relatively hurt its economy.
  • For the first three months of the year, China’s economy shrank by 6.8% when it saw nationwide shutdowns of factories and manufacturing plants. It was the first time China’s economy contracted since it started recording quarterly figures in 1992.
  • Over the previous two decades, China had seen an average economic growth rate of about 9%; although, the pace has gradually been slowing.
  • There were 637m trips in China over the eight-day holiday which generated revenue of 466.6bn RMB ($69.6bn, £53.8bn), according to data from its Ministry of Culture and Tourism.
  • Duty-free sales in the tropical island province of Hainan more than doubled from last year, soaring by nearly 150% according to the local customs data.

READ: China joins WHO vaccine programme as it fills huge gap left by United States

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What they are saying

According to Iris Pang, Chief China Economist for ING in Hong Kong, “I don’t think the headline number is bad. Job creation in China is quite stable which creates more consumption.”

According to Robin Brant, BBC China correspondent, “China’s economy continues to grow at rates unimaginable in other Covid-hit countries. Draconian lockdown measures to control the virus combined with some government stimulus appeared to have worked well. While the growth of 4.9% is slightly below some forecasts, industrial output – a good barometer of state-controlled activity, came in above expectations”

READ: Many Billionaires became richer by 27% during the COVID-19 pandemic – Swiss Bank UBS

READ: Access Bank gets regulatory approval to become a Holding Company

According to Yoshikiyo Shimamine, Chief Economist at the Dai-Ichi Life Research Institute in Tokyo, “China’s economy remains on the recovery path, driven by a rebound in exports, but we cannot say it has completely shaken off the drag caused by the coronavirus.”

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