New Telegraph

CBN: FG’s deficits, others may undermine Nigeria’s COVID-19 response

Fiscal and monetary policy measures introduced by the country’s authorities to tackle the impact of the coronavirus (COVID-19) pandemic, may be weakened by the Federal Government’s deficits, underutilization in the labour market and inflationary pressures, the Central Bank of Nigeria (CBN) has said.

The apex bank stated this in, “Monetary, credit, foreign trade and exchange policy guidelines for fiscal years 2020/2021,” posted on its website at the weekend.

According to the CBN, while the measures, such as the N100bilion intervention in the heath sector, the N1trillion intervention in the manufacturing sector, the N50bilion Micro, Small and Medium Enterprises (MSMEs) facility, among others, are laudable, given that they are aimed at encouraging and expanding domestic production, improving productivity as well as generating employment opportunities, their expected impact could be affected by some headwinds.

Some of the likely challenges listed by the CBN include: “Increased Federal Government deficits, which may narrow fiscal space and crowd-out private investment; underutilization in the labour market due to weakened aggregate demand; and a build-up in inflationary pressures resulting from the increase in Value Added Tax (VAT) and border protection.”

 In fact, the apex bank forecast that: “Headline inflation is expected to hover around 13.97 and 14.15 per cent at end-December 2020, owing to: supply shocks which may likely happen due to decline in economic activities, globally as a result of COVID-19 pandemic that started in China in Q4:2019; demand shocks emanating from domestic and international lockdowns; food supply shocks associated with non-tariff border protection; and effect of the implementation of the new budget and minimum wage.”

Also, citing the impact of the pandemic on the global economy as well as the sharp drop in oil prices, the CBN said its outlook for the Nigerian economy is, “mildly optimistic” with output growth expected: “to lie between -3.1, -1.0 and 0.24 per cent in 2020, predicated on low oil price between US$10 pb, US$20 pb and US$30 pb.”

Similarly, the regulator is predicting that the external sector will deteriorate for the country in this year due to the oil price slump and the Covid-19 pandemic.

It stated: “The degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows. As a result, external reserves are expected to lie between US$29.9 billion and US$34.3 billion at end-December 2020 (predicated on current declining oil price between US$20 and US$40).

 “This development, in addition to exchange market pressures, emanating from speculative activities in the BDC and I & E segments of foreign exchange market, is expected to exert pressure on the naira exchange rate. In addition, increased risk aversion behaviour by investors may negatively impact on capital inflow, as they flee to safe-haven assets.”

The CBN said that while the financial sector is expected to remain resilient in 2020, policymakers should, “nurture the fragile phase of the economy with caution and employ appropriate policy instruments” to address the likely adverse effects that may emanate as a result of the pandemic.

Specifically, it stated that: “Structural reforms, particularly executing the much-delayed power sector recovery plan, implementing the financial inclusion strategy, and addressing infrastructure gaps remain essential to boosting inclusive growth.”

On monetary and credit policy measures for the review period, the CBN said it would continue to deploy Open Market Operations (OMO) as the major instrument for managing system liquidity, adding that it would also use other orthodox tools such as the Cash Reserve Requirements (CRR), discount window operations and foreign exchange interventions.

 Significantly, it stated that: “The minimum liquidity ratio for commercial, merchant and non-interest banks shall be retained at 30.0, 20.0 and 10.0 per cent, respectively, subject to review from time to time. In the 2020/2021 fiscal years, the ratio of loans to deposits ratio shall be a maximum of 80.0 per cent.”

In addition, the CBN disclosed that it would: “Commence a phased implementation of Basel III standards and revise the existing Basel II guidelines on Regulatory Capital and Supervisory Review Process in 2020/2021 fiscal years,”  (in order)  to reduce the risk of a build-up of excessive leverage in the banking system and provide a safeguard against excessive concentration.”

POLS (pix: Tambuwal)

Ondo guber: APC has failed Nigerians – Tambuwal

Onyekachi Eze, Abuja

Sokoto State Governor, Aminu Tambuwal said the ruling All Progressives Congress (APC) has failed the country.

Tambuwal at the flag off of the Peoples Democratic Party (PDP) campaign for the October 10 Ondo State governorship election, told the people that the crisis in APC was an indication that the party cannot manage a country like Nigeria.

“The APC is in disarray, not only in Ondo State where they are busy fighting but also in the national where they unlawfully, against their own constitution, dissolved their own National Working Committee.

“Are they not a party of confusion? Are they capable of governing Nigeria?

“As at now, they do not have a Board of Trustees for their party. Since the inception of APC till today, they have not been able to get Board of Trustees for their party. Is that not enough confusion? That is why I am to confirm to you that APC is not the choice for Ondo State,” the governor stated.

He added that the APC has failed in its promises to fight corruption, provide security and revamp the economy.

“At this time of COVID-19, they have increased the suffering of Nigerians. Instead of giving us palliatives, they are adding to the sufferings of Nigerians by increasing fuel prices, by increasing electricity tariff.  The timing is very wrong,” he said.

Tambuwal told the people that the election of PDP governor, Eyitayo Jegede is a step towards restructuring Nigeria.

PDP National Chairman, Prince Uche Secondus accused the Ondo State Governor, Rotimi Akeredolu of turning the state to a family business.

Secondus told the people that Jegede will bring the desired change, and called on President Muhammadu Buhari to ensure free and fair election in Ondo and Edo states.

On his part, Chairman of the PDP National Campaign Council, Governor Seyi Makinde said the Ondo election is not about Yoruba presidency but about putting Ondo State among the states that will lead the charge to restructure Nigeria.

“This election is about you choosing between continuous servitude and freedom.

“We want freedom for the entire South-West. It has started from Oyo State, it will continue in Ondo state on October 10.

“Will you rather stay with a candle when you have the sun? Ondo State is the sunshine state. They have been lighting candle for you, so it is time to let the sun shine again,” Makinde stated.

The PDP candidate, Eyitayo Jegede, promised to provide jobs for the people, reduce school fees and rejig the economy if elected on October 10.

“There will be joy for the people. Today, we serve notice on the APC government and by the grace of God; they will pack and leave the Government House for us,” Jegede added.

Read Previous

EPL: Salah hat-trick sinks Leeds in thriller; wins for Palace, Arsenal

Read Next

Man bags 21 years for N33.6m fraud, faking suicide of businesswoman

Leave a Reply

Your email address will not be published. Required fields are marked *