CBN Governor, Mr. Godwin Emefiele


The Central Bank of Nigeria CBN, Tuesday warned that the country’s marginal exit from recession may be under a serious threat, given current weak economic fundamentals being shown by the economy and therefore called for urgent measures to avert the impending economic doom.

Recall that Nigeria’s economy exited recession in 2017 after suffering negative growth in the economic performance indicators for five consecutive quarters.

Governor of the apex bank, Mr. Godwin Emefiele, who briefed newsmen shortly after the two-day meeting of the Monetary Policy Committee MPC members, said the economy has started showing signs of weakness.

According to him, the committee was concerned that there was a fresh threat of recession as the economy recorded growth rate of 1.95 per cent and 1.5 per cent during the first and the second quarters of this year, respectively.

He attributed this slowdown to the oil sector, with strong linkages to employment and growth.

He also cited the late implementation of the 2018 budget, weakening demand and consumer spending, rising contractor debts, and low minimum wage as some of the risks to output growth.

Others, according to him, 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 per cent in August 2018 from 11.14 per cent 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 per cent and 1.5 per cent 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”, Emefiele stated.

On what could be done to stimulate economic activities, the apex bank boss said that though growth remained weak,  effective implementation of the 2018 budget by the Federal Government and introduction of policies that would encourage credit delivery to the real sector of the economy might boost aggregate demand, stimulate economic activity and reduce unemployment in the country.

He also said that the committee urges the government to take advantage of the current rising trend in oil prices to rebuild fiscal buffers, strengthen government finances in the medium term and reverse the current trend of decline in output growth.

It also called on the fiscal authority to intensify the implementation of the Economic Recovery and Growth Plan ERGP to stimulate economic activities, bridge the output gap and create employment, as it expressed concerns over the potential impact of liquidity injection from election-related spending and increase in federal allocations, which are rising in tandem with increase in oil receipts.

Other areas of the economy the MPC expressed concerns include the rising level of non-performing loans in the banking system, urging banks to closely monitor and address the situation, the weak intermediation by Deposit Money Banks and its adverse impact on credit expansion as well as investment growth by the private sector, among several others.