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Going for Growth: CBN’s gift to the economy

 

The Central Bank of Nigeria (CBN) is considering interest rate cut to stimulate growth and protect the economy, its Governor, Godwin Emefiele has said.

Speaking at the Going for Growth Session held at the weekend in Abuja, the CBN boss said explained that central banks in key markets across the globe have responded by reducing policy rates in order to stimulate growth, while measures are being taken by fiscal authorities to build resilient buffers to contain the spread of the coronavirus. 

He said the event was more relevant now than ever before, given the external headwinds that the Nigerian economy faces, such as the effects of the trade and technology wars, and more importantly the recent spread of the corona virus, which has emerged as a major threat to global growth in 2020. 

He said: “The impact of the coronavirus across over 100 countries, has affected global supply chains, as well as demand for goods and services. Commodity prices have also been affected, as crude oil prices have plummeted by over 45 per cent since January 2020,” he said.

Emefiele said: “The CBN fortunately had already embarked on similar measures which has resulted in significant reduction in lending rates, as part of our efforts to boost growth. Working with the fiscal authorities, we will not hesitate to deploy additional measures to strengthen our buffers and insulate the Nigerian economy from the global headwinds,” he said. 

According to Emefiele, the  International Monetary Fund (IMF) had early this year,  projected that global growth would rise to 3.3 per cent in 2020, up from 2.9 per cent in 2019. 

“However, with the onset of the virus, global growth is expected to decline in 2020, but the extent of the decline would depend on how the epidemic is contained over the next few months,” he said. 

According to Emefiele, one of the critical measures that helped to boost growth in 2019, was the impact of the CBN’s new minimum loan to deposit ratio, which was initially at 60 per cent, and subsequently raised to 65 per cent. 

“We also imposed restriction on access to Open Market Operation (OMO) auctions in order to encourage banks to lend to the real sector. Indeed, the Banking sector has responded positively with the rise in aggregate industry credit from N15.3 trillion May 2019 to over N17.4 trillion in January 2020.” 

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