The Central Bank of Nigeria (CBN) has projected the country’s economy to grow by 3.0 percent in 2021, up from negative growth of -1.8 percent in 2020.
CBN governor, Mr. Godwin Emefiele who made the projection while delivering his Keynote Address at the 56th CIBN Annual Bankers Dinner in Lagos on Friday, noted that although Covid-19 pandemic had huge negative impact on the Nigerian economy, the efforts of monetary and fiscal authorities have made quick recovery possible.
Emefiele also noted that the country’s Inflation is expected to continue on its downward trajectory into 2022 as continued interventions along with the onset of the harvest season aid improved supply of food items, which would further help to decelerate inflationary pressures.
Speaking about how the CBN responded to the challenges posed by the pandemic, Emefiele said, “First, the Central Bank of Nigeria worked with the fiscal authorities in instituting strong policy support measures capped under the Economic Sustainability Plan (ESP), which was designed to contain the effects of the pandemic, restore stability to the economy by helping households and businesses affected by the pandemic and to lift our economy out of the woods through massive interventions to critical sectors.
“Under this plan, the monetary and fiscal authorities collectively mobilized and injected over N5trillion to support households and businesses. It is gratifying to state that the Central Bank of Nigeria deployed more than N3.5trillion, – about 4.1 percent of Nigeria’s GDP to critical sectors such as agriculture, manufacturing, electricity, and healthcare in order to stimulate and help the economy recover from the deep shock. Other specific policy measures undertaken include.
-Reduction of the monetary policy rate from 13.5 to 11.5 percent to improve the flow of credit to households and businesses.
-Reduction of the interest rate on CBN intervention loans from 9 to 5 percent.
Extension of the moratorium on principal repayments for CBN intervention facility to March 2022.
-Granted regulatory forbearance that allow banks restructure loans given to sectors severely affected by the pandemic.
-Strengthened the Loan to Deposit ratio policy, which has resulted in a significant rise in loans provided by financial institutions. Total gross credit rose by over 21.1 percent over the past year, from N19.4 trillion to N23.5 trillion.
-Created a N50 billion target credit facility for affected households and small and medium enterprises through the Nirsal Microfinance Bank, against which N363.5 billion has been disbursed to over 767,000 Nigerian households and micro businesses.
-Mobilized key stakeholders in the Nigerian economy, under the Private Sector Coalition Against COVID-19 (CACOVID) team that raised N39.646 to support the fight against the scourge. The funds were used to support three (3) key priority areas:(i) development of 39 fully equipped isolation centres including Intensive Care Units (ICUs) and molecular testing labs and procurement of medical equipment such as PCR test kits across the country; (ii) provision of palliatives in the form of essential food items to 1.7 million households, an equivalent of 8 million Nigerians; and (iii) improving awareness in rural awareness on the COVID-19 virus and capacity building for community health workers.
-Created a N1 trillion facility in loans to boost local manufacturing and production across critical sectors; of which 53 major manufacturing projects, 21 agriculture related projects and 13 service projects are being funded from this facility.
-Creation of a NGN100 billion intervention fund for pharmaceutical companies and healthcare practitioners to expand and strengthen the capacity of our healthcare institutions. We have increased this fund to N200 billion to accommodate more players in the healthcare sector, such as phytomedicine practitioners and manufacturers of medical devices and vaccines. Our primary focus is to create a hub where medical officers can have access to diagnostic equipment to carry out quality medical services at an affordable price for Nigerians.”
The CBN governor noted that so far, over N107.7 billion has been released to support 114 healthcare projects, including six (6) greenfield (new) and 108 are expansionary (brownfield).
The projects financed, he said, included cancer treatment centres, medical diagnostics, pharmaceuticals, dental services, eye clinics, and other healthcare service providers.
“We are happy to inform you that the intervention programs have contributed to the increased bed space in our hospitals, and improved healthcare productivity as evident in the increased number of successfully treated Covid 19 patients,” Emefiele said.
“These developmental initiatives combined with our monetary and financial policies have helped to support the recovery of our economy and in re-aligning general macroeconomic conditions.”
Emefiele said the measures taken by the apex bank led to robust economic recovery, with GDP growth at 4.03 percent in the third quarter of 2021.
He said, “As a result of these measures, we witnessed robust economic recovery as GDP growth stood at 4.03% in the 3rd quarter of 2021, following the 5.01% growth recorded in the 2nd Quarter of 2021. The economy has remained on a positive growth path for four consecutive quarters after the recession in the 3rd quarter of 2020. 41 out of the 46 sectors assessed in the 3rd quarter by NBS, recorded positive growth, as growth was driven by significant improvements in the non-oil sector, particularly, Agriculture Manufacturing, Trade, ICT, Construction, Finance and Transportation. We have also witnessed a gradual recovery in manufacturing output growth as the Manufacturing PMI index rose to 47.3 points in October 2021 from 44.9 in January 2021.
“Our interventions particularly in the manufacturing and the agriculture sectors significantly helped to encourage continuous improvements in growth in these two key sectors of our economy. Today, our food production systems have become more sustainable due to the improved output at our farms and local factories. Output of staple commodities such as rice, maize, palm oil and tomatoes have grown significantly, and we have also seen increased efforts of our local manufacturing firms to engage in backward integration efforts. Second, a visit to any major retail chain will reveal an increasing number of high quality made in Nigeria products relative to imported goods, which is helping to increase domestic production, generate employment and wealth in our country. If these intervention efforts were not carried out by the monetary and fiscal authorities, our economy would have been in a grim state.”
Emefiele also noted that the efforts of the apex bank have helped to reduce inflation despite the disruptions in the supply chain caused by Covid-19.
“Inflation has continued to moderate for seven consecutive months, as it declined from 18.17 percent in March 2021 to 15.9 percent in October 2021 supported by improved output of staple food items. Inflation however still remains above our benchmark, which means efforts must continue to be made to slow down the pace of the rise in prices.”
On External Reserves, he said: “Supported by our demand management policy, in addition to support from the successful issuance of the $4bn Eurobond and the IMF SDR, our external reserves today stands at over $41.4bn which is enough to support 9 months of imports. This is not just a morale booster for both foreign direct and portfolio investors willing to invest in the economy, but it provides significant fire power to support our domestic industries that need to import critical machines and equipment for domestic production and exports.”
On Exchange Rate, Emefiele said, “As a result of our demand management policy, the naira has remained largely stable around N411/US$1 at the I&E window particularly since the discontinuation of FX allocation to Bureau De Change operators along with the convergence between the CBN and NAFEX rates. Banks are now able to meet the demands of their customers seeking forex for SMEs, school fees, medical and PTAs, which has reduced the need of customers to rely on alternative providers of foreign exchange. Average daily Fx turnover at the I&E window is now over $250million, up from $40million in April 2020.
“Our current account deficit has narrowed significantly, from a huge deficit of 4.53% of GDP in the 4th quarter of 2020 to negative 0.44% of GDP in the 2nd quarter of 2021 due to a surplus position in the goods account. The surplus position in the goods account is due to a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittance inflows. Remittance inflows have been supported by our naira for dollar program, and we have seen a surge in remittance inflows from over $5m per week in June 2020 to over $100m per week in October 2021.”
Speaking on the outlook of the economy, he said, “Following the impact of the various accommodative policy measures, our economy made a swift exit from the recession. Unlike the five quarters it took to exit the previous recession, the economy rebounded after just two quarters of contractions, underpinning the resilience of the economy amid greater policy support. I am pleased to note that growth has returned to pre-covid levels due to the accommodative policy support provided by the monetary and fiscal authorities.
“Although uncertainties remain around the mutating Delta virus, prospects of a broad-based economic recovery in Nigeria remain bright as efforts are made to improve access to vaccines for Nigerians, in addition to measures aimed at implementing safety protocols to curb the spread of the virus.
“As a result of these growth enhancing policy measures, we project that GDP will grow at 3.0 percent for 2021 up from -1.8 percent in 2020. Inflation is expected to continue on its downward trajectory into 2022 as continued interventions along with the onset of the harvest season aid improved supply of food items, which would further help to decelerate inflationary pressures.”