Nigeria can avoid economic recession, says CBN

The Monetary Policy Committee of the Central Bank of Nigeria has said the country can avoid an economic recession this year based on the “far-reaching measures taken by the monetary and fiscal authorities.

The CBN Governor, Mr Godwin Emefiele, in the communique of the MPC meeting held on Thursday, noted that available data on key macroeconomic variables indicated that the economy achieved a positive output growth during the first quarter of 2020.

“The committee noted that even if the lag effects of COVID-19 result in a low negative output growth in the second quarter of 2020, it could quickly be reversed to avoid a recession by Q3 2020 based on the far-reaching measures taken by the monetary and fiscal authorities to mitigate the combined effects of the pandemic and oil price shock,” he said.

He noted that projections by both the International Monetary Fund and the Federal Government indicated that the economy would contract in 2020 by 3.40 percent.

Emefiele said, “Given more recent developments, however, CBN staff projections indicate a somewhat less pessimistic range of contraction.

“This forecast is underlined by the measures to arrest the rapid spread of COVID-19, and improvement in crude oil prices, which stood at about $34.8 per barrel as at May28, 2020.”

He said the moderate recovery in crude oil prices would reduce the pressure on the external reserves and government revenue.

“Headwinds to growth, however, remains the legacy issues of the persistent infrastructural and security challenges,” he added.

According the CBN governor, central to the committee’s considerations were the impact of the COVID-19 pandemic, the oil price shock and the likely short to medium-term consequences on the Nigerian economy.

He said the MPC acknowledged the gradual improvement in macroeconomic variables, particularly the improvement in the equities market, the containment measures of the coronavirus-induced health crisis, and the impact of oil price increase on the external reserves.

The committee noted the stability in the banking system shown by the increase in total asset by 18.8 percent and total deposits by 25.52 percent (year-on-year).

He said the performance of the Loan-to-Deposit Ratio policy introduced in July 2019 showed that total credits increased by N3.1 trillion or 20.45 percent, with manufacturing, retail and consumer loans, general commerce and agriculture as major beneficiaries.

Emefiele said the CBN had also approved N10.9 billion to 14,331 beneficiaries under the N50 billion Targeted Credit Facility for households as well as small and medium enterprises, adding that N4.1 billion had been disbursed to 5,868 successful beneficiaries.

The MPC stressed the need for government to work towards a gradual reopening of the economy in line with recommendations of the Presidential Task Force and advice from medical experts.

It said “efforts must be directed at saving not only lives but also livelihoods.”

Emefiele said, “This is to enable the resumption of economic activities necessary to stimulate growth, accelerate the pace of recovery and restore livelihoods, particularly the vulnerable in our society.

“On prices, the MPC expressed concern about the heightened inflationary pressure attributed to a combination of monetary and structural factors.”

He said while price stability remains the bank’s primary mandate, the committee expressed the need for a balanced approach in supporting growth in the face of rising domestic prices.