Another Economic Recession Looms in Nigeria - CBN

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria on Tuesday, September 25, warned that Nigeria may be heading for another round of economic recession following the weak fundamentals currently being shown by the economy.

The CBN governor, Godwin Emefiele, said this shortly after the two-day meeting of the MPC members held at the headquarters of the apex bank.

According to Emefiele, the economy is already showing signs of weakness and the committee was concerned that there was a fresh threat of recession because the economy recorded growth rate of 1.95 % and 1.5 % during the first and the second quarters of 2018, respectively.

The CBN governor noted that the slowdown emanated from the oil sector which has strong links to employment and growth.

Emefiele complained about the late implementation of the 2018 budget, weakening demand and consumer spending, rising contractor debts, and low minimum wage as part of the signs.

The others include the impact of flooding on agricultural output, continued security challenges in the north east and north central zones, and growing level of sovereign debts.

“The MPC observed that despite the underperformance of key monetary aggregates, headline inflation inched up to 11.23 percent in August 2018, from 11.14 percent in July 2018.

“The near time upside risks to inflation remain the dissipation of the base effect expected from 2019 election related spending, continued herdsmen attacks on farmers and episode of flooding, which destroyed farmlands and affected food supply ultimately.

“In this regard, the committee urges the fiscal authorities to sustain implementation of the 2018 budget to relieve the supply side growth constraints so that they can address the flooding, which has become perennial on a permanent basis.

“Relative stability has returned to the foreign exchange market buoyed by the robust external reserves, with inflation trending downward for the 18th consecutive month.

“The gains so far achieved appeared to be under threat following the new data, which provides evidence of weakening fundamentals. The committee identified rise in inflation and pressure on the external reserves created by the capital flows reversals as the current challenges to growth.

“It noted that the underlying pressures have started rebuilding and capital flows reversals have intensified as shown by the bearish trend in the equities’ market even though the exchange rate remains very stable.

“The committee was concerned that the exit from recession may be under threat as the economy slid to 1.95 percent and 1.5 percent during the first and the second quarters of 2018, respectively.

“The committee noted that the slowdown emanated from the oil sector with strong linkages to employment and growth,” he said.

Emefiele said even as growth remained weak, the effective implementation of the 2018 budget and policies could encourage credit delivery to the real sector of the economy to boost aggregate demand, stimulate economic activity and reduce unemployment in the country

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