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CBN boosts economy with N8.8trn, opposes lockdown

  • Retains 11.5% interest rate, CRR at 27.5%


  • Emefiele: Apex bank’ll take over commodity exchange




To save the economy from severe crisis, the Monetary Policy  Committee (MPC) of the Central Bank of Nigeria (CBN) has counselled the Federal Government against locking down economy amid second wave of COVID-19.


This was as CBN said it has thus far supported Federal Government and  the economy to the tune of N8.8 trillion.


Of the amount, the sum of $18 billion, representing 14.5 per cent of Gross Domestic Product (GDP), was advanced to support the central government since the emergence of COVID- 19, while N2 trillion was advanced towards sectors’ interventions.


The MPC, which also endorsed retention of lending rate (MPR) at 11.5 per cent, Cash Reserves Ratio (CRR) at 27.5 per cent, Liquidity ratio at 30 per cent around  asymmetric corridor of +100/-700 basis around MPR, in addition, gave apex bank the go-ahead to take concrete steps that will lead to reduction in food prices and other agriculture commodities.


CBN Governor, Mr. Godwin Emefiele, disclosed these in Abuja at the end of the first MPC meeting in 2021, yesterday. Acclaimed rating firm, Fitch, recently picked on CBN for supporting Federal Government with borrowing.


The firm said CBN was assisting government in financing weakening economy’s balance sheet. On Fitch report, he said: “Let it be known first and foremost that the CBN is banker to government. Second, the CBN is a lender of last resort, not just to government, but also to our banks when they run into short term liquidity problems.


“In 2015, 2016 you all recall that there was a global crisis, which resulted in a massive drop in price of petroleum product (crude oil). Unfortunately, Nigeria is a country that will celebrate when crude price is high, but will sneeze when the price of crude goes down. In this case, the price of crude went down and we sneezed, we sneezed because revenue came down.


When revenue came down government became incapable to finance all its obligations. If government cannot finance all its obligations, I think it will be irresponsible on the part of CBN as a lender of last resort not to support the Federal Government.”


Emefiele said that the bank mobilised intervention and support to tune of N2 trillion from 2020 to January 2021 since the outbreak of COVID-19.


“In light of the on-going synchronized efforts by the monetary and fiscal authorities to mitigate the impact of COVID-19, the bank has committed substantial amount of money towards this objective. Indeed, total disbursements as at January 2021 amounted to N2 trillion.


COVID-19 Targeted Credit Facility (TCF) meant for household and small businesses, wherein we have disbursed N192.64 billion to 426,016 beneficiaries.


We have also disbursed N106.96 billion to 27,956 beneficiaries under the Agri-Business Small and Medium Enterprises Investment Scheme (AGSMEIS), while in the Health Care Support Intervention Facility, we have disbursed N72.96 billion to 73 projects that comprise 26 pharmaceutical projects and 47 hospitals and health care services projects in the country.


“To support the provision of employment opportunities for the Nigerian youth, CBN also provided financial support through the Creative Industry Financing Initiative and Nigerian Youth Investment Fund amounting to N3.12 billion with 320 beneficiaries and N268 million with 395 beneficiaries, respectively.


“On enhancing power supply, the bank has so far provided N18.58 billion for the procurement of 347,853 electricity reading meters to DisCos in support of the National Mass Metering Programme,” he said.


The Committee, Emefiele said, urged the bank to sustain its current drive to improve access to credit to the private sector, while exploring other complementary initiatives, in collaboration with the Federal Government, to improve funding to critical sectors of the economy. Emefiele said the bank is not disposed to locking down the economy in the face of second wave of COVID- 19, saying the impact would be catastrophic for the economy. “Yes, there is a second wave. In Nigeria, we are trying to convince government not to conduct a wholesome lockdown because that is catastrophic on everybody and the economy,” he said.


He stated that if the scourge persists, CBN may decide to extend five per cent reduction in interest rate by 12 months for CBN intervention. Speaking on efforts being taken by CBN to reduce high cost of food items, he said the bank is taking the decision to cut off influence of private commodity dealers, who he accused of engaging in hoarding of commodities to create artificial food scarcity.


“We have found in the market the activities of private commodities exchange. Their activities have not helped our country and it is time for the Nigeria Commodity Exchange to be repositioned, restructure to perform the role, which by law it has been empowered to do.


“We have written to the president and, luckily, we have received the approval to restructure and reposition the Nigeria commodity exchange. It will operate like standard commodity exchanges that you can find in any part of the world, which includes stabilizing of food prices generally,” he said.

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