The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), has projected that the country would experience an epileptic economy rebound from coronavirus after its outbreak in Nigeria during the first quarter of 2020.
MPC, in order to ensure a stable economy from next year, approved a downward review of the Monetary Policy Rate (MPR) from 13.5 percent to 12.5 percent and retained status of other policy parameters that can aid Nigeria’s economic recovery.
These projections were contained in a communiqué read by the CBN Governor, Godwin Emefiele, after the committee’s meeting attended by 10 members in Abuja yesterday.
Reading the outcome of the meeting, Emefiele said that the believed that country’s economy like its counterpart affected by COVID-19 was still weak and that domestic macroeconomic variables indicate that the Nigerian economy may record negative quarterly Gross Domestic Product (GDP) growth in the 2nd quarter of the year 2020.
According to him, the committee believed that there is cautious optimism that the year may end in marginal negative territory, with strong recovery prospects in 2021.
The CBN governor noted that decisions made by the committee were guided by outbreak of COVID-19 and other global development and activities in the domestic economic environment.
Emefiele said: “The Committee called on the government to sustain its efforts at diversifying revenue sources and ensure fiscal prudence, particularly, with the use of the recent grants and multilateral concessionary loans”.
He said that the committee during the meeting encouraged the Federal Government to adopt a counter-cyclical fiscal policy framework to shield the economy from persistent revenue shocks and aid its recovery next year.
The CBN governor noted that the committee, while commending the apex government’s palliative to cushion the pandemic impact on households and businesses, reiterated the need for a robust fiscal policy strategy to attract private investment and capital, to finance the huge infrastructure deficit in Nigeria, and strengthen existing initiatives by the federal government and the CBN in this direction.
“MPC recognized the supportive developmental roles of the CBN towards addressing some of these structural issues. The MPC specifically expressed optimism on the future impact of N50billion Household and SME facility, out of which N49.195 billion has been disbursed, to over 92,000 beneficiaries.
“The N100 billion healthcare and N1.0 trillion manufacturing and agricultural interventions to support the rebound in growth from the impacts of the pandemic on the economy and CBN coördinated CA-COVID, a private sector intervention scheme that mobilized over N32 billion to support the economy.
“Also, MPC acknowledged that CBN had disbursed over N152.9 billion to the manufacturing sector to finance 61 manufacturing projects and another N93.6 billion to the Healthcare sector, amongst many other sector-specific facilities”.
Ahead of next year, the CBN governor noted that aside from pegging the MPR at 12.5 percent, it also retained the asymmetric corridor of +200/-500 basis points around the MPR.
He stated that the committee also retained the Cash Reserves Ratio (CRR) at 27.5 percent as well as Liquidity Ratio at 30 percent to aid the country’s economy.
“As a result, the Committee noted that the earlier downward adjustment of the MPR by 100 basis points to 12.5 percent to signal the loosening monetary policy stance is yielding positive impact as credit growth increased significantly in the economy.
“The Committee understands that the positive impact of the various fiscal and monetary interventions on households, SMEs, and manufacturing sectors.
“MPC also noted that increasing MPR at this stage will thus be counter-intuitive and will result in upward pressure on market rates and cost of production,” he added.