From Uche Usim, Abuja
The Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, on Tuesday, kicked against any plans to lockdown the country due to the COVID-19 pandemic, saying that such a move will horribly wreck the economy and livelihood of Nigerians.
He, however, assured that the apex bank would extend the five per cent interest rate on loan repayment by one year to March 31 2022.
Speaking at a briefing marking the end of a two-day meeting of the bank’s Monetary Policy Committee in Abuja, Emefiele noted that members agreed to retain the Monetary Policy Rates at 11.5 per cent, the asymmetric corridor, at +100/-700 basis points around the MPR, CRR at 27.5 per cent and retain the Liquidity Ratio at 30 per cent.
The apex bank had in February last year agreed to reduce the interest rate on all of its intervention funds from nine percent to five percent for a period of one year effective March 1, 2020.
But when asked of the possibility of another extension considering the rampaging pestilence, he responded on the affirmative, especially as the second wave of the virus has affected the economy.
Emefiele said, “On interest rate of 5 per cent concession in march, we would extend by 12 months again the interest rate of five percent on the CBN intervention, this is the CBN contribution to the Economy and any action that would support the growth of the economy is what we will do.”
The committee also urged the banks to boost lending to aid recovery.
Emefiele warned exporters not to leave their dollars overseas but repatriate it back home for others to lend from it.
“It is not everytime that people will be pestering the CBN for dollars. If you’re an exporter, repatriate your dollars. Don’t leave it overseas” he said.
The MPC said it was faced with the dilemma of stagflation, inflationary pressure and to continue reversing price stability.
Emefiele noted that with price stability as it’s major mandate, the bank will focus on reducing inflation rates which have continued on its upward trajectory. According to him, the inflation cannot be put at the feet of monetary authorities.
The consumer price index, (CPI) increased by 15.75 percent (year-on-year) in December 2020. This was largely driven by food prices with food inflation rising to 19.56 per cent, caused by increases in prices of Bread and cereals, Potatoes, Yam and other tubers, Meat, Fruits, Vegetable, Fish and Oils and fats.
Emefiele revealed that a total sum of N33 billion have so far been spent to support the economy which has been badly hit by impact of the global COVID-19 pandemic.
The CBN boss said there was dampened optimism that the economy will rebound by the first quarter of 2021.
He stressed that the apex bank will work with fiscal authorities to quicken the pace of recovery through targeted spending. According to him, “this involves partnering with the private sector.”
Emefiele took time to respond to a report by Fitch alleging the Apex Bank was lending too much to the federal government.
In the report, the global rating agency had described the federal government’s repeated recourse to its Ways and Means facility with the Central Bank of Nigeria (CBN) as a show of weaknesses in public finance management.
The W&M facility is the government’s pre-existing overdraft at the CBN and was estimated at N9.8 trillion as of the end of 2019.
Part of the report read, “Sustained use of direct monetary financing could raise risks to macroeconomic stability – given the current weak institutional safeguards – but we expect the FGN to reduce its use of the facility in 2021.
“The FGN directly borrowed 1.9 per cent of GDP from the CBN to fund its fiscal deficit in 2020, estimated by Fitch at 3.6 per cent of Gross Domestic Product.
Emefiele noted that as a lender of last resort and a banker to the government it would be impossible to stop lending to the government.
“I think it will be irresponsible as a lender of last resort not to support the federal government. With a global health of such proportion support to the government cannot be overlooked.
“It is a very unfair report. Our efforts are not different from what other central banks are doing especially in light of reduced receipt by fiscal authorities,” he added.