US Fed cuts rate to zero for first time since 2008 to shield economy from virus
The United States Federal Reserve, equivalent of the Nigerian central bank, announced it is dropping its benchmark interest rate to zero and launching a new round of quantitative easing in an emergency move Sunday to shelter the world’s largest economy from the effects of the Coronavirus pandemic.
The QE program will entail $700 billion worth of asset purchases entailing Treasurys and mortgage-backed securities.
Markets responded negatively, with Dow futures pointing to a drop of 900 points in early trading Monday, as the emergency cut failed to calm markets expecting recession. Asia stocks also fell.
The new fed funds rate, used as a benchmark both for short-term lending for financial institutions and as a peg to many consumer rates, will now be targeted at 0% to 0.25% down from a previous target range of 1% to 1.25%.
The moves, the most dramatic by the U.S. central bank since the 2008 financial crisis, are aimed at keeping financial markets stable and making borrowing costs as low as possible as businesses around the country close and the U.S. economy hurtles toward recession.
At a press conference Sunday evening following the decision, Jerome Powell, the Federal Reserve Chair, said the Fed would be patient before lifting rates again.
“We will maintain the rate at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals,” Powell said.
“That’s the test … some things have to happen before we consider … we’re going to be watching, and willing to be patient, certainly,” he added.
The move follows several actions by the Fed over the past two weeks in which it enacted a 50 basis point emergency rate cut and expanded the overnight credit offering, or repo, for the financial system up to $1.5 trillion.
From travel bans to school closures: Here’s how Sub Saharan Africa is responding to Coronavirus
South Africa, Kenya, Rwanda, Senegal and Ghana are taking steps ranging from travel bans to school closures as Sub Saharan Africa tries to deal with the Coronavirus outbreak and limit its spread.
Ghana for one is closing its borders to travelers from countries with more than 200 cases of the coronavirus as the West African nation seeks to prevent contagion of the disease.
Kenya, which has also banned entry of travelers from any virus-hit country, announced to close schools nationwide on Sunday after two fresh cases of coronavirus were confirmed, taking the tally to three in the country.
Down south, South Africa declared a national state of disaster over the virus outbreak and announced the continent’s most drastic measures yet to curb its spread.
The government is imposing travel bans on some nationals, shutting schools and banning public gatherings of more than 100 people, President Cyril Ramaphosa said Sunday in a televised address to the nation after an emergency cabinet meeting.
Nigerians are waiting to see how their government will respond. A committee comprising senior officials has been set up to look into the matter but no policy statements on how to tackle the virus have been made since then.
Sub-Saharan Africa, particularly Nigeria, has so far been less badly hit by coronavirus than Europe or China. Nigeria, South Africa, Ivory Coast, Senegal, Cameroon, Togo, Burkina Faso, Democratic Republic of Congo, Ghana and Gabon have also registered cases.
More than 127,000 people have been infected globally and over 4,700 have died since the virus first emerged in China late last year, according to a Reuters tally.
Sub-Saharan Africa did not confirm its first coronavirus infection until Feb. 28 in Nigeria, but experts warn that rising cases could test already fragile health systems in a region that accounts for 1 percent of global healthcare spending.
Top economists say Coronavirus-induced global recession already here
The coronavirus outbreak has triggered extreme fear in financial markets as investors face up to an unsettling reality: The pandemic, unprecedented in modern times, could tip the world into a recession.
Italy’s decision to put much of its prosperous north, including its financial capital, Milan, on semi-lockdown, along with an escalating outbreak in the United States and a precipitous crash in oil prices, is forcing economists to reassess their predictions for how the virus will hit growth.
To many, a contraction during the first and second quarters of 2020 looks increasingly likely.
Joachim Fels, global economic advisor at PIMCO, told clients on Sunday that he now sees a “distinct possibility” of a recession in the United States and Europe during the first half of the year, followed by a recovery in the second half. Japan, he said, “is very likely already in recession.”
Early calm returns to Nigeria’s FX market
The naira strengthened against the dollar across Nigeria’s multiple foreign exchange markets Friday after the Central Bank signalled a day before that it was prepared to keep the exchange rate stable against all odds.
To keep the naira stable, the CBN must contend with the impact of the coronavirus outbreak on crude oil demand, the price war between Saudi Arabia and Russia which has sent prices tumbling and a resurgent dollar which is riding on renewed investor interest in the world’s favoured reserve currency.
A dogged defence of the currency in spite of current realities will come at a cost to external reserves and could lead to higher interest rates and rising inflation in an economy still trying to recover from a record contraction in 2016.
The currency in Africa’s top oil producer appreciated by 1.6 percent against the dollar to $368 at the Investors and Exporters window from a record low N374 a day before.
The naira also gained 7 percent to N380 per dollar at the parallel market after weakening to as low as N410, traders said.
The panic-buying that hammered the naira cooled after the CBN said it had no plans to devalue the naira and threatened to rein in on what it called “speculative activities by unscrupulous players in the foreign exchange market” by charging them for economic sabotage. The apex bank declared it had enough reserves to meet legitimate foreign exchange demand.
Explosion renders hundreds homeless in Nigeria’s biggest city
Hundreds of residents in Abule Ado area of Lagos, Nigeria’s biggest city, were on Sunday morning rendered homeless following an explosion that rocked the area, resulting in uncontrollable fire.
The impact of the explosion was felt several kilometers away, as several buildings including those in Festac Town, were destroyed and their roofs blown off.
Churches in Festac Town, including Living Faith Church (Winners Chapel) located at 7th Avenue, as well as Ark Parish of the RCCG, located on 1st Avenue were affected.
It could not be ascertained what led to the explosion that occurred at about 8:50am.
However, chairman of Amuwo-Odofin Local Government Area, Valentine Buriamoh, ruled out pipeline vandalism.
There were, however, speculations that it might have been caused by a ruptured gas pipeline. Figure of casualties involved in the explosion could not be immediately ascertained.
But, Femi Oke-Osayintolu, managing director, Lagos State Emergency Management Authority (LASEMA), said the actual figure of persons affected would be released after investigation into the occurrence had been concluded.
