Nigeria’s economy to contract by 1.03% in Q2 ~CBN
The Central Bank of Nigeria (CBN) has projected the nation’s economy to contract by 1.03 percent in the second quarter of the year and closed the year at -0.16 percent.
The Gross Domestic Product (GDP) projection by the regulatory bank was milder than what the World Bank and the International Monetary Fund (IMF) project for the country at the end of 2020.
The two global financial powerhouses said the Nigerian economy will contract by -3.0 percent and -5.4 percent, respectively at the close of 2020.
Though the GDP report for the second quarter is yet to be released by the National Bureau of Statistics (NBS), the GDP report for the first quarter showed that the economy grew 1.87 percent in the first quarter of the year.
“Staff projections suggest that, with a successful implementation of the Federal Government’s Economic Sustainability Plan, real output growth is expected to range between -0.39 percent and -0.16 percent in 2020, and between 0.7 percent and 1.48 percent in Q1 2021 depending on the level of oil price,” Mike Obadan, a member of the Monetary Policy Committee (MPC) the CBN wrote in his personal note to the June rate-setting committee meeting.
Mahmoud Isa-Dutse, another member of the MPC said Nigeria’s goal of growth with equity should be pursued relentlessly by both the fiscal and monetary authorities to scale down the projected negative impact of the pandemic on the Nigerian economy.
Robert Asogwa in his statement outlined three key downside risks which have generally characterized Nigeria’s domestic economic outlook since the COVID-19 crisis.
“First, fiscal deficits have been widening as revenue declined because of the pandemic. Second, inflation rates have been sticky on the downwards side as supply disruptions affect prices of food and non-alcoholic beverages.
Third, tightening balance of payments have been threatening the stock of foreign reserves thus creating pressures on exchange rates,” he wrote on his personal note to the MPC meeting.
Meanwhile, the banking sector credit to the economy rose by N3.46 trillion year-on-year to June 2020, while new credit in June 2020 accounted for N773 billion, up from N412.7 billion in May 2020. The number of new credits (recipients) similarly rose by about 42,000 to 93,578 from 51,700 in May. The huge credit
output in the economy was underpinned by improved resilience of the banking system, the CBN said.
The bank said the surge in new credit and its major destinations including agriculture and manufacturing in recent months, obviously lend credence to the efficacy of extant real sector support (policy) initiatives of the Bank – the minimum loan-to-deposit ratio (LDR), the differentiated cash reserves requirement (DCRR) and the development finance interventions.