Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) yesterday downgraded the growth forecast of Nigeria’s economy in 2022 to 3.24 per cent.
The Federal Government earlier in the year predicted a growth of 4.2 per cent.
The International Monetary Fund (IMF)’s prediction is 2.7 per cent.
CBN Governor Godwin Emefiele announced the forecast at the end of a special MPC meeting in Abuja.
He said: “Monetary and fiscal stimulus will remain in place to continue to support economic recovery until downside risk to growth improves and upside risk to inflation decimate substantially.”
He pledged to improve on “the Anchor Borrowers’ Programme, and all other programmes that we have that is meant to boost agricultural output. If agricultural output in our various products are improved, we would see a further moderation in food inflation with moderates headline inflation. Those are the things we would be doing. If these actions are taken, we are reasonably confident that inflation will come down”.
Emefiele argued that the government “must take urgent and specific actions to address the factors that have been responsible for up-tick in inflation.
He said: “We believe if addressed, we see a solution to the rising of commodity prices in the country”.
Reacting to recent IMF advice, the CBN governor said that “in terms of advice, it is important we reiterate the fact that CBN remains a development finance oriented central bank.
“It is normal, very normal for an emerging markets a developing economy, to deploy development finance tools through interventions to support the growth of the economy”.
Emefiele said about two years ago, the monetary policy thrust was on price and monetary stability that is conducive to growth. “If we are to adopt price and monetary stability policy that is conducive to growth in an environment where there is tight space; where revenue shortfalls abound, and even government has to borrow, it’s just reasonable that the CBN has to step in to support the fiscal, to fill that space, not through grant, but through loans to small holder farmers and households.”
He also alluded to Federal Government’s efforts to solve the lingering petroleum products crises in the country.
He said the Minister of Finance was meeting with officials of the Nigeria National Petroleum Company Limited (NNPC Limited), while another meeting has been set up between the CBN and the NNPC Ltd to see what interventions the apex bank can design to help mitigate the rising prices of petroleum products.
Emefiele said: “We are told at this meeting today by the representative of Minister of Finance that the minister, Mrs. Zainab Ahmed and NNPC are holding engagements to see what can be done to make sure that adequate funding is provided so that petroleum products are made available,” adding that the petroleum products “can be imported and filling stations can have these products.”
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Emefiele said the apex bank will “be engaging the Power Minister, NNPC, Nigeria Bulk Electricity Trading Company (NBET), to see if it is a kind of intervention that will make it easy for them to get these products so that this shortage can stop.”
He said: “When supply increases and people are confident that whatever they hold, either pms or diesel they can easily go and replace them, the arbitrary price will reduce. When arbitrary price reduces, you can begin to see there would be moderation in the price of these products which will ultimately reduce in the prices of other products. This is simply how we think we can work.”
The CBN chief said he is concerned about the impact which the petroleum products scarcity is having practically on all economies, saying this has resulted into imported inflation for the Nigeria economy.
He said immediate action must be taken to ensure that this trend does not continue, given the adverse consequences and aggressive price level could have on living and purchasing power, saying one of the reasons the price of diesel has gone up is because marketers do not know where and when they will get their next batch of diesel from.
According to him, the arbitrary price increase of diesel is due to marketers not being sure when they will get the next supply of diesel”.
The MPC advised the CBN management and the fiscal authorities, “to take specific and urgent action to avoid many power generating stations shutting down”.
The CBN, Emefiele said, “has always been there to support the power sector. “Like you all know, we have disbursed N1.3 trillion in the last five years to support both generating and Discos or to acquire equipment or to buy meters or to improve what is being paid to generating companies so that the system can continue to operate”.
He warned that capital flows will be restricted in 2022 as a result of the Russia-Ukraine crisis, saying “the rise in both corporate and public debt in the Advanced Economies and Emerging Market and Developing Economies, is also a major threat to global financial stability as the risk of sustainability is heightened in the current tensed global environment. Capital flows are thus, expected to be restricted as global financial conditions tighten over the short to medium term.
The MPC also noted the continued resilience of the banking system, evidenced by the further moderation of the ratio of Non-Performing Loans (NPLs) to 4.84 per cent in February 2022 from 4.90 per cent in December 2021.
On the external reserves position, the Committee noted the decrease in the level of gross external reserves to US$39.44 billion as of March 17, 2022, from US$40.21 billion on January 25, 2022, indicating a decrease of 1.95 per cent during the review period.
Committee was satisfied that the use of the CBN’s discretionary CRR policy should be deployed more aggressively to control the level of money supply in the economy as a result, the MPC voted to: retain the Monetary Policy Rate (MPR) at 11.5 percent; retain the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 27.5 percent; and retain the Liquidity Ratio at 30 per cent.