Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has advised Nigerian banks to support the media and aviation sectors through loan disbursements.
This is in view of the lingering Coronavirus pandemic which has wrought major economic havoc across different sectors, leading to revenue declines and multiple job losses.
In a series of tweets posted on Tuesday night via CBN’s official Twitter handle, it was disclosed that Emefiele asked the banks to help avert the spate of job losses already being recorded amongst journalists and aviation workers.
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In order to avoid massive job loses in the media industry due to the lingering pandemic, Gov. Godwin Emefiele urges banks to support the media industry.
— Central Bank of Nigeria (@cenbank) August 25, 2020
Understanding COVID-19’s devastating impact on the media industry
The media and aviation sectors are among the hardest hit by the pandemic. An earlier report by Nairametrics uncovered how most print media organisations have had to slash salaries by 50% whilst laying off many staff, even as the current pandemic-induced economic climate continues to make it harder to operate.
As you may well know, the media industry mostly relies on advertising revenue to thrive. However, inasmuch as advertising is critical for most companies and organisations, they tend to drastically cut down on their advertising budgets during a recession. Unfortunately, Nigeria is in a recession, no thanks to the COVID-19 pandemic.
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Meanwhile, the pandemic grounded planes and dried up airlines’ revenues
Earlier this month, Nigeria’s Air Peace announced that it had sacked about 70 of its pilots and reduced staff salaries by as much as 40%. The sad decision was, of course, taken to protect the company against the adverse effects of COVID-19.
In a similar development, the management of Bristow Helicopters Limited also announced the sack of about 100 pilots and engineers. Bristow’s announcement came barely 24 hours after Air Peace’s announcement.
Bristow Helicopters, which provides auxiliary services to the oil and gas industry, also blamed COVID-19 for the decision to lay off the pilots.
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For more than two months, local and international flights were suspended, as planes were grounded in a bid to curtail the spread of the deadly Coronavirus. This move, though necessary, understandably affected airlines’ revenues; hence the layoffs.
Local flights only just resumed earlier this month, with international flights expected to follow suit later this week.
Now, as planes resume flights, CBN’s Emefiele wants banks to do all that they can to avail airlines the financial support they need to bounce back.
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#CBN Gov.. Mr. Godwin Emefiele urges banks to do all in their power to support the aviation industry in Nigeria.
— Central Bank of Nigeria (@cenbank) August 25, 2020
Lending amidst the uncertainties
Nigeria’s apex bank has always encouraged banks to lend. In late 2019, it carried out an upward review of the Loan to Deposit Ratio (LDR) from 60% to 65%, and directed Deposit Money Banks (DMBs) to comply.
Interestingly, the CBN’s stance on loans has been yielding results. Last week, Nairametrics reported that the value of loans given by banks to the private sector increased from N16.251 trillion in June 2019 to N18.632 trillion as at the end of May 2020. This represents a 21.53% (or N3.5 trillion) increase within a 1-year period.
Get economic data from Nairametrics on Nairalytics
Despite the progress, banks are being careful about who they lend to and how they lend. This is because they must guard against any possiblity of bad/non-performing loans.
Speaking of non-performing loans, CBN Deputy Governor, Kingsley Obiora, while commenting on the recent increase in banks’ lending to the private sector, also noted that “non-performing loans (NPLs) decreased to 6.4% at the end of June 2020, compared to 9.4% in the corresponding period of 2019, reflecting recoveries, write-offs and disposals.”
It should be noted that the CBN had recently averted major bad loans by encouraging banks to restructure as much as 41% of their loans to customers. Nairametrics quoted Governor Emefiele, who explained why this became imperative.
“If the CBN did not ask the banks to grant these forbearances to their customers, the loans will go bad immediately by our prudential ratios,” he said at the end of last month’s MPC meeting.