By Fola James
The Central Bank of Nigeria, CBN has disclosed that the economy recovery plan of the federal government could be set back by the new wave of the corona virus pandemic.
Recall that the Minister of Finance, Budget and National Planning, Zainab Ahmed said earlier this month that, the nation’s economy will rebound in the first quarter of this year.
The apex bank, however, said no recovery will take place until the last quarter of the year.
Godwin Emefiele, CBN Governor disclosed this on Tuesday at the end of the statutory monthly meeting of the Monetary Policy Committee, MPC, where the committee members all agreed to retain the interest rate( MPR) at 11.5 percent.
Financial analysts insist that the CBN has hurt the ability of commercial banks in the country to advance loans required to boost the economy. Some top bankers who spoke with the magazine said the decision is unfortunate, noting that the nation’s MPR is one of the lowest in the world.
Adeyemi Ola, a financial analyst in Lagos said “Even though MPR is intended to crash the lending rate, it’s a good intention on the part of the CBN. But you must consider also that DMBs are not Father Christmas, they are in the business to make money for depositors and shareholders. You can understand what I meant.”
He added “Besides that, Nigeria is not like other countries where the risk of loan advances is very low. The risk of default is part of the cost for commercial banks. Putting everything together you will realize that lenders will be very cautious in advancing loans in this regime.”
But the CBN said it took the right decisions in the interest of the economy.
It said “On the domestic front, recovery is expected to progress reasonably, following the mild contraction recorded during the third quarter of 2020 and with fourth quarter output growth figures expected to show further improvement.
“The Committee reviewed the developments in the global and domestic economic and financial environments in 2020 and the outlook for 2021 as well as the risks to this outlook.
“Ten(10) members of the Committee were in attendance. Global Economic Developments The Committee noted abetter-than-expected recovery in most economies towards the end of 2020, leading to moderation in the contraction of global output.”
The committee said the projected economic recovery could be delayed due to the upsurge of the COVID 19, noting that global economy has been further disrupted by the new strain of the pandemic.
The MPC “observed that the rapid spread of the new variant of the Coronavirus, seemingly associated spike in fatalities and the recent re-introduction of containment measures across several economies, may dampen the recovery in 2021.
“In the Advanced Economies, headwinds largely associated with the COVID-19 pandemic such as vaccination-related challenges, weak aggregate demand associated with less than full employment in labour markets, partially functioning supply chain networks, the rapid spread of the new variant of the Coronavirus and a high infection rate dampened the initial rebound in economic recovery towards the end of 2020.
“Output growth in the Emerging Market and Developing Economies (EMDEs) remained uneven across countries. In China, output slowed marginally in the third and fourth quarters of 2020, following a faster-than-expected rebound in the second quarter of 2020.Following the lull in the second quarter, India’s economy grew sharply in the third quarter, reflecting welcome adjustment to the stimulus measures. Accordingly, the International Monetary Fund (IMF) estimated global growth in 2020 as a contraction of 4.4per cent and forecast growth in 2021 to improve to 5.2per cent.”
The CBN said the direction of the economy will be determined in the way the pandemic is managed by the government at all levels.
