The Monetary Policy Committee of the Central Bank of Nigeria said COVID-19 pandemic would not only result in health crises, but also massive economic crises that would force even leading industrialised countries into recession.
The Governor of Central Bank of Nigeria, Mr Godwin Emefiele, announced the position of the committee at the end of its two-day meeting held at the apex bank’s headquarters in Abuja on Tuesday.
According to Emefiele, the MPC underscored the COVID-19 pandemic as a public health crisis which would continue to undermine any monetary or fiscal stimulus unless appropriate measures were taken to trace, test, isolate and treat infected persons in order to curtail the spread. He therefore calls for a significant reduction in migration across the country.
The MPC urged the Federal Government to take the necessary steps to safeguard the population through close monitoring and emergency measures to identify and care for infected persons in the country.
Speaking on behalf of the committee, the governor of CBN said some of the major headwinds to the current projection for global growth included disruption to the global supply chain arising from the COVID-19 pandemic; oil price downturn as a result of subdued global demand and vulnerabilities in major financial markets.
He said, “The committee reviewed the prevailing adverse conditions in the global economy such as the COVID-19 pandemic and the oil price shock as well as the likelihood of continued oil supply glut into the near future, focusing on the impact of these headwinds on the Nigerian economy.
While taking into cognisance the impact of the decline in oil prices on external reserves, exchange rate pressures, the CBN governor said the MPC commended the CBN for its prompt response with the adjustment of the exchange rate to uniform market rates and the removal of distortions.
On the weakened revenue position of the Federal Government, arising from the sharp drop in oil prices, Emefiele said the MPC reiterated the need for government to urgently reduce reliance on oil revenue by gradually diversifying the economy and improving tax collection.
While noting the speedy response of the Federal Government to the oil price shock by the revision of the 2020 budget downwards by N1.5tn and the oil price benchmark to $30 per barrel, the committee urged the National Assembly to fully cooperate with the Federal Government in coming up with a budget that reflects current economic realities.
On the introduction of price modulation measures, resulting in reduction in the pump price of Premium Motor Spirit from N145 to N125 per litre, the committee noted that the move would boost aggregate demand, lower inflation and improve the welfare of the ordinary Nigerians. It therefore urged the Federal Government to leverage on Public Private Partnership to intensify investment in infrastructure to increase output and employment.
On the need for more investments inflow into the economy, the governor said there were potential for investments inflow into the Nigerian auto manufacturing, aviation and rail industries.
While recognising the success of the CBN’s loan-to-deposit ratio policy and its potential to alleviate production shortfalls, reduce unemployment and boost aggregate demand, the governor said the committee urged the apex bank to pursue this initiative and other related policies to a conclusive end.
On the key monetary policy parameters, the CBN governor said, all members of the committee agreed to retain the current Monetary Policy Rate at 13.5 per cent. The apex bank boss said the committee also held the Cash Reserves Ratio at 27.5 per cent while the Liquidity Ratio was left unchanged at 30 per cent.