Nigeria risks a relapse into recession, the Central Bank of Nigeria
(CBN) issued a serious warning to the federal government yesterday.
CBN
Governor Godwin Emefiele told reporters at the end of the Monetary
Policy Committee (MPC) meeting in Abuja that they are worried that “the
exit from the recession may be under threat as the economy slowed to
1.95 percent and 1.50 percent within the first and the second quarter
2018”.
CBN raised same alarm in 2015 and by 2016 it happened.
The economy plunged into recession shortly after from end of 2016 through 2017.
Emefiele
said: “The Monetary Policy Committee appraised the microeconomic
environment and noted that at its July meeting, modest stability was
achieved in key indicators, including inflation, exchange rate and
reserves. In particular, relative stability returned to the foreign
exchange market, going by a robust level of external reserves with
inflation trending downward for the 18th consecutive months. These gains
so far achieved appear to be under threat of reversal following the new
data which provides evidence of weakening fundamentals.”
This
threat to the economy, he said, comes from “rising inflation and
pressure on the external reserves created by the capital flow reversal
as the current challenges grow”. He noted that the inflationary measure
was rebuilding, and “capital flow reversal has intensified as shown by
the bearish trend in the equities market even though the exchange rate
remains very stable.”
The MPC, Emefiele said, “noted that the
slowdown emanated from the oil sector, with strong linkages to
employment and growth in the key sectors of the economy”.
The
committee urged the government to take advantage of the current rising
trend in the oil prices to rebuild fiscal buffers, strengthen government
finances in the medium term and reverse the current trend of decline in
output growth.
Other threats to the economy, which may aggravate
the onset of recession, Emefiele warned, include “the potential impact
of liquidity injection from election related spending, and increase in
FAAC distribution, which is rising in tandem with increase in oil
receipt.”
The Committee “was concerned with the rising level of
non-performing loans in the banking system, traced mainly to the oil
sector and urged the banks to closely monitor and address the
situation.”
Members of the MPC were concerned over the weak
intermediation by the Deposit Money Banks and its adverse impact on
credit expansion and investment growth by the private sector.
The
MPC noted that the economy was still confronted with growth challenges
and inflationary pressure but reiterated the need for synergy between
the monetary and fiscal authorities as availed option for macroeconomic
stability.
The MPC also called on the fiscal authorities “to
intensify the implementation of the Economic Recovery and Growth Plan
(ERGP) to stimulate economic activities, bridge the output gap and
create employment.”
The committee lamented that the threats to
the food supply chain in major food producing states due to poor
infrastructure, flooding and security challenges may lead to a “rise in
food prices, contributing to the uptake in the headline inflation”.
However,
the committee was optimistic that as harvests progress, “in the coming
months, pressure on food prices would gradually continue to recede while
growth enhancing measures would over the medium term, have some
moderating impact on food prices”.
The MPC called on the
government to fast track implementation of the 2018 budget to help jump
start sustainable economic recovery and to facilitate passage of the
Petroleum Industry Bill to increase contribution to the overall GDP.
