BY EMEKA EJERE
Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele says the apex bank is contemplating reducing interest rate, a measure he said other countries are taking to protect their economies against the impact of the dreaded coronavirus.
The nation’s economy has been heavily affected since the coronavirus outbreak. The development has among other things forced the federal government to consider reviewing its 2020’s N10.59 trillion budget, which already came with a deficit of over N2 trillion, to reflect the changes in the oil market and the impact of coronavirus on trade.
Mr. Emefiele said the CBN’s decision to cut rates is a global pattern among central banks. He said this is part of the resilient measures being put in place by fiscal authorities to aid the growth of a declining economy.
Only yesterday, the Federal Reserve (US central bank) announced that it has slashed interest rates as part of an effort to stabilize the economy following a rocky week on the financial markets.
The bank’s Board of Governors cut interest rates to near-zero, the second time that the central bank has cut interest rates in as many weeks. The Federal Reserve also launched a $700 billion quantitative easing (QE) program to help prevent a further economic downturn sparked by the spread of coronavirus.
A statement said the bank will maintain its interest rates “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
Similarly, the Bank of England has cut interest rates in an emergency move to bolster the economy during the coronavirus outbreak.
The monetary policy committee voted unanimously to slash the bank rate from 0.75% to 0.25% at its first unscheduled meeting since the depths of the 2008 financial crisis as part of a coordinated package of measures alongside the chancellor Rishi Sunak’s budget.
Emefiele 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.
“The CBN, fortunately, had already embarked on similar measures which have 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 economy from the global headwinds.”
He said this while revealing some measures the CBN took last year to support the economy which included the CBN’s minimum loan to deposit ratio, rising from 60% to 65%.
Emefiele also disclosed that CBN, “also imposed restriction on access to Open Market Operation (OMO) auctions 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.
“I am aware that these loans have been granted to borrowers across different sectors at considerably lower rates. Although a lot more still needs to be done, we intend to sustain these policy measures, as it will help support improved economic growth and create more employment opportunities.”
Although the International Monetary Fund (IMF) projected earlier this year that from 2.9% in 2019, the global growth would rise to 3.3% in 2020, with the spread of coronavirus at a time oil market is experiencing a record drop in oil price following the price war between Russia and Saudi Arabia, causing the Brent crude oil price to crash to $30 but rising to the current $34.43, the growth is expected to decline.