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

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.




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