Recession: FG’s spending, CBN’s expansionary stance to fast-track recovery – Emefiele


By Kayode Tokede

The governor, Central Bank of Nigeria (CBN) ,  Mr. Godwin Emefiele has explained that the federal government spending and expansionary stance of the Bank will be desirable to support recovery and guide the economy out of recession.

Speaking at the end of the Monetary Policy Committee in Abuja on Tuesday, he said loosening its monetary indicators would trigger excess liquidity and worsen the inflationary pressure.

The National Bureau of Statistics (NBS) recently announced Gross Domestic Product (GDP) that moderated significantly from -6.10 per cent to -3.62 per cent in the third quarter of 2020 and 14.23per cent inflation rate as at October.

According to him, “With respect to a hold position, the Committee was of the view that this will be beneficial as it will allow current policy measures to permeate the economy while observing the trend of developments. The Committee also felt that the heterodox policies of the Bank targeted at various sectors are showing positive results that would further engender growth.”

Emefiele in his outlook expressed that, “In the domestic economy, available data and forecasts for key macroeconomic variables also suggest optimism in output growth in the fourth quarter of 2020, due to the positive outlook for most economic activities.

“Accordingly, the economy is expected to recover from recession by the end of 2020, while inflation is projected to moderate by the first quarter of 2021.”

He said the members consideration remained focused around tailwinds imparting upward pressure to domestic prices and key

headwinds to output growth.

According to him, “The Committee noted that inflation continued to be driven by supply side disruptions arising from the COVID-19 pandemic and other legacy factors.

“Key amongst these are: the security challenges in parts of the country; increase in food prices; and the recent hike in pump price of PMS and electricity tariff. The MPC, therefore, emphasized the need to address structural supply side issues putting upward pressure on costs of production and unemployment.

“To address the public health crisis associated with the COVID-19 pandemic, the Committee urged the Federal Government to make relentless effort to procure a substantial quantity of the COVID-19 vaccines to surmount the public health crisis and pave the way for a broader macroeconomic recovery.

“The Committee noted that the contraction had bottomed out, since it moderated significantly from -6.10 to -3.62 per cent in the third quarter of 2020. This was so because both the monetary and fiscal authorities had anticipated the impending recession and had put measures in place for its quick reversion.

“Some of these measures include the Economic Sustainability Programme by the Federal Government and other CBN facilities targeted at households, small and medium enterprises (SMEs), youth empowerment, and reduction of unemployment.

“It thus, urged the Federal Government to maintain its initiatives targeted at reducing unemployment, particularly amongst the youths, citing the recent #EndSARS protests and ensuing agitation by hoodlums as potentially disruptive to output growth in Nigeria.

“To this end, the MPC reiterated its support for the various development finance initiatives of the CBN to stimulate production and reduce unemployment.

“MPC further encouraged the Bank to intensify its efforts by increasing funding to more beneficiaries so as to boost consumer spending and accelerate recovery from recession.

“On the Financial Markets, the Committee considered the improved performance in the equities market as a leading indicator of medium-term macroeconomic recovery.

“It thus urged the Bank to maintain its policies on exchange rate and financial system stability to attract more investment into the Nigerian equities market.

“The MPC noted that credit to key sectors of the economy increased and encouraged the continued credit support to employment stimulating sectors to hasten the recovery of output growth and improve employment particularly among the youths.

“The Committee emphasized the need for the Bank to maintain its regulatory surveillance over the banking system to ensure that nonperforming loans remain low.”