The Central Bank of Nigeria (CBN) on Tuesday heightened confidence that the local economy would remain positive in 2019, despite obvious headwinds as it retained key benchmark lending rates for the 14th straight time.
The headwinds, according to CBN Governor, Godwin Emefiele would come from softening oil prices, persistent security challenges arising from insurgency in the North East and herdsmen attack in some part some the country and perceived political risks associated with the 2019 general elections.
The encouraging projection comes just a day after the International Monetary Fund (IMF) lowered the country’s 2019 economic projections to 2 percent from the 2.3 per cent projected in October on the back of the recent drop in global crude oil prices.
Godwin Emefiele, addressing a pressing conference on the outcome of the two days meeting of the Monetary Policy Committee (MPC) said all the eleven members present voted to retain the MPR 14 percent, Cash Reserve Ratio at 22.5 percent, Liquidity Ratio at 30 percent and Asymmetric corridor around the MPR at +200 and -500 basis points.
He said in taking the decision, the Committee argued that the observed and recent high capital inflow into the Nigerian economy despite the perception of election risks is evidence of the confidence of the international community in the country’s macroeconomic management and
provides what he said was a compelling reason for the committee to await clarity on macroeconomic performance after the general elections in February and March.
He said that in the light of the observed risks confronting the economy including the global and domestic inflationary pressures which have intensified the risks of currency depreciation, the MPC was of the view that a loosening option was very “remote” and weighing the balance of its judgment on price stability conducive to growth, the MPC felt that tightening will result in the loss of the gains so far achieved.
This may then drive the banks to reprise assets thus increasing the cost of credit as a well as elevating credit risks in the economy. It will also worsen the position of the Non-performing Loans of the banks.
He said that the committee also felt that tightening will dampen investments and hamper improvements in the output growth given the already fragile growth performance achieved so far.
“Forecasts for key macroeconomic variables in 2019 portend a positive outlook for the local economy,” Emefiele said.
“Output growth is expected to be driven by fiscal stimulus, from increase in oil and non-oil sources to support the federal government Economic Recovery and Growth Plan,” the governor added quoting figures from the institutions, including the apex bank.
“The economy is projected to grow by 2 percent according to IMF, 2.2 percent by the World Bank and 2.28 percent by the Central Bank of Nigeria.”
Emefiele also reeled out numbers on inflation, exchange rate stability, economic expansion, to underscore an improving economy and said particularly that the CBN expects that the 2018 GDP would come in at about 1.8 percent.
But he noted that the outlook for inflation for the first half of 2019 remained mixed with the expectations of an increase in the near term before a gradual decline towards the mid-year.
“Inflation is expected to rise marginally amidst palpable tailwinds which include increased spending in the preparations for the 2019 general elections and continued disruptions to the food supply chain in the insurgency prone areas and herdsmen attack on some regions of
the country.”
The CBN is also worried about the uncertainties in global economic outlook on the back of the ongoing trade tensions between the US and its key allies, slower growth in China, unclear direction of Brexit, negotiations and continuing monetary policy nomalistaion in some
advanced economies, all of which pose key threats.
Emefiele, however announced that CBN projects that the oil prices may relatively remain stable with the $50/barrel bracket in view of recent OPEC production cutting actions.
“The committee was comfortable with the output of the Nigerian economy in 2019 with the global uncertainties and challenges,” the governor stated, as he cautioned on rising external borrowing which could fast push the country into the pre 2005 Paris Club exit level. He also
urged government to create fiscal buffers to improve macroeconomic management.
On the CBN/ MTN issue, the governor hoped the matter will be resolved amicably.
“I am glad to tell you that in November, we held a round of meetings with MTN officials and concluded in December and the matters were resolved.
He said the discussions resulted in a notional reversal of the sum of $53 million, amounting to about N19.5 billion and has since been paid by the MTN and that the terms of resolution of these matters have already been lodged at the Nigerian courts.
On the CBN FX restriction policy, he said the CBN will get more aggressive in ensuring that any or all food items that can be produced in the country that are currently being imported will soon be added to the foreign exchange restriction list.
He said the structures being put in place by the CBN to ensure exchange rate and economic stability was yielding resulting, warning that the CBN and EFCC will investigate and punish any company or individuals suspected of bringing these banned items in for money laundering and economic sabotage.
Onyinye Nwachukwu, Abuja
