The Central Bank of Nigeria (CBN) is retaining it current monetary policy rate of 12.50%.
This was revealed by the Governor of the Central Bank of Nigeria, Godwin Emefiele on Monday at a briefing on the Monetary Policy Committee meeting, which held today.
Read full details of 27th Monetary Policy Committee Meeting.
CENTRAL BANK OF NIGERIA COMMUNIQUÉ NO. 131 OF THE 274th MONETARY POLICY COMMITTEE MEETING HELD ON MONDAY 20TH JULY 2020
The Monetary Policy Committee (MPC) met on 20th July 2020, amidst elevated uncertainties across the world. The projected global output contraction was revised downward, as many countries had to extend the lockdown period in the wake of a second wave of coronavirus infections, and continued lack of effective treatment or vaccines for the Novel Coronavirus disease. However, there is cautious optimism that the global growth contraction would reverse to positive growth path by 2021, as the pandemic is contained, potential treatment found, and restrictions on business activities are lifted by most economies.
The Committee reviewed developments in the global and domestic economic environment in the first half of 2020 and evaluated the monetary policy options to address these challenges.
Ten (10) members of the Committee were in attendance.
Global Economic Developments
Global output growth weakened further, as a result of the persistent headwinds from the COVID-19 pandemic. These headwinds comprised: persisting decline in global aggregate demand and supply; disruptions in global supply chain and trade; rising sovereign and corporate debts; heightened financial market vulnerabilities; low prices of crude oil and other commodities; and rising unemployment.
The Committee noted, with concern, the IMF’s further downgrade of global economic contraction to -4.9 per cent from -3.0 per cent in 2020. The downward revision was based primarily on the amplified negative impact of COVID-19 pandemic on many advanced and emerging market economies, as they witnessed extended lockdown periods and restrictions on economic activities.
The Committee noted the general optimism of a V-shaped global growth trajectory due to the expected early abatement of the pandemic and the gradual resumption of economic activities. However, the Committee believes that global recovery, while assured for 2021, is more likely to be a U-shaped one. In this regard, it is not surprising that the recovery has been revised downwards from 5.8 per cent to 5.4 per cent in 2021.
The Committee observed the continued downward trend in inflation in most Advanced Economies, particularly below the 2.0 per cent long-run target, despite the huge monetary and fiscal stimulus injections during the period. The Committee, however, noted that as the lockdown eases across the advanced economies, aggregate demand is expected to strengthen and inflation would pick up to support the expected output growth. Across the Emerging Markets and Developing Economies (EMDEs), the Committee observed the divergent inflation trends, with most developing commodity-exporting countries recording increase in inflation compared with other more diversified economies. This development had inadvertently exerted significant pressure on the exchange rates of these economies as the pass-through to domestic prices has been amplified.
The Committee observed that the unprecedented increase in public spending to support households and businesses, in the wake of the pandemic, may spur inflationary pressures in some economies, as the supply shortfalls struggle to meet up with the demand build up.
Domestic Economic Developments
Available data from the National Bureau of Statistics (NBS) showed that real Gross Domestic Product (GDP) grew marginally by 1.87 per cent in the first quarter of 2020 compared with 2.55 and 2.10 per cent in the preceding and corresponding quarters of 2019. The performance was largely driven by the 5.06 per