Available data on Nigeria’s key macroeconomic indicators suggest a likely subdued output growth for the economy for most of 2022, Godwin Emefiele, the Central Bank governor, stated on Monday.
He made the revelation while addressing the press in Abuja on the outcomes of a one-day Monetary Policy Committee meeting where all key lending parameters were unchanged, including the Monetary Policy Rate (MPR) at 11.5%; asymmetric Corridor around the MPR at +100/-700 basis points; Cash Reserve Ratio (CRR) at 27.5%; and liquidity ratio at 30%.
Emefiele said the committee decided to adopt a hold stance to indicate what he called a precautionary and consistent policy stance with the prevailing economic conditions particularly as further economic and financial shocks are exerted from the ongoing Russia-Ukraine war.
The Nigerian economy which grew fastest in eight years in 2021 by 3.40% is forecast to grow in 2022 by 3.24%, according to CBN estimate; 4.2% federal government estimate; and 2.7% IMF estimate.
But heightening domestic and global headwinds, including power and fuel shortages, covid-19 uncertainties, as well as potential negative outcomes from
Russia-Ukraine war which has seen supply disruptions present downside risks to the already fragile economy.
Emefiele said the anticipated slowed growth “is hinged on the dampening impact to growth of rising energy prices in the domestic economy, tightening external financial conditions as some advanced economies pursue interest with liftoff as well as the persistence of legacy security and infrastructural problems.”
According to him, the CBN is particularly concerned over the impact which the global price increase in petroleum and other products is already having practically on all economies.
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This, he said has resulted in imported inflation on demand in the Nigerian economy as the CBN believes that specific actions need to be taken to ensure that this trend does not continue given the adverse consequences an aggressive rising price level would have on cost of living and purchasing power of Nigerians.
Before the Russian – Ukraine war, CBN was optimistic that the moderate decline in inflation was sustainable on account of the positive impact of good harvests on price levels.
But it is now worried that whereas global prices have gone up, this has been compounded by shortage of supply of petroleum products.
“And because of the war, there has been supply shortages that has also resulted in a rising price of not just petroleum products, but also food prices.”
He attributed the core inflation which accelerated to 14.01 percent in February 2022 was primarily because of supply shortage.
In the short run , the CBN is urging the NNPC to take urgent steps to ensure adequate supply of patronage products in the country, to reduce the rate of arbitrary increase in price of petroleum products by oil marketers.
Emefiele also said at the meeting, that the committee members were gravely concerned by the unprecedented rate of oil theft recorded in recent times, and its debilitating impact on government revenue and accretion to reserve.
In the medium term, the CBN is hopeful that the proposed take off of the Dangote refinery in the course of the year would bring substantial relief to the supply of petroleum products in the country.
On solutions, Emefiele spoke of ongoing discussions between the Minister of Finance and the NNPC to resolve the fuel crisis and that the CBN would be ready to provide the needed funds.
“We’ll be engaging NNPC as well, if there’s any kind of intervention that we can provide to help make it easy for them to bring in these products.”
The committee also advised the CBN management and fiscal authorities to take specific and urgent action to avoid many power generating stations shut down for Turn Around maintenance, resulting in the current unwarranted shutdown of our generated assets.
It further advised that on need to redouble its development finance initiatives aimed at boosting domestic food output, which would have been moderating for inflation going forward, and by extension, headline inflation could get moderated.
It is however expected that monetary and fiscal stimulus will remain in place to continue to support the recovery until downside risks to growth and upside risks to inflation dissipate substantially.
On the IMF advice that the CBN should scale down its interventionist programmers, Emefiele stated that the apex bank has always been there to support the economy and will continue to do so considering the peculiarity of the Nigerian economy.
“I think it’s important that we reiterate the fact that the Central Bank of Nigeria remains a development finance-oriented central bank and it is very normal for an emerging or developing economy to deploy global finance tools through interventions to support the growth of the economy.
In the last two and half years, CBN has provided funding interventions of more than N3 trillion to support the ailing economy in different ways. Emefiele said the CBn has no regrets doing so.
“Our GDP is still fragile. We still feel the vulnerabilities. IMF knows that intervention in the manufacturing sector is happening and we have facts to show,” Emefiele stated.
