As the impact of the Coronavirus rises, the Central Bank of Nigeria (CBN) has warned the National Assembly (NASS) not to tamper with revised oil benchmark of $30 per barrel.
CBN Governor, Godwin Emefiele gave the warning in Abuja at the Monetary Policy Committee (MPC) briefing.
Emefiele commended the fiscal authorities for reacting speedily to the threats posed to the economy by COVID-19 by slashing the 2020 by ₦1.5trillion and also pegging the crude oil benchmark price at $30 from $57.
The CBN Governor cautioned the legislators not to tamper with the new benchmark price as their attempt may likely end up being unrealistic.
After the bi-monthly meeting, Emefiele disclosed that members of the committee unanimously agreed to retain all the key rates and parameters changed.
By this development, MPC retained the Monetary Policy Rate (MPR) at 13.5 percent; +200/-500 assymetric corridor around the MPR; Cash Reserve Ratio (CRR) at 27.5 percent and Liquidity Ratio at 30 percent.
The MPC underscored the COVID-19 pandemic as a public health crisis that may “undermine any monetary or fiscal stimulus unless appropriate measures are taken to trace, test, isolate and treat infected persons in order to curtail the spread.”
Emefiele and his fellow MPC members urged the federal government to ensure “that migration across the country is significantly reduced.”
The MPC, also, “called on the Federal Government to take the necessary steps to safeguard the population through close monitoring and emergency readiness measures to identify and care for infected persons in the country, including compulsory restriction of movement to curtail spread of the pandemic.”
With regards to the banking industry, the Committee noted the sustained improvement in the financial soundness indicators, and applauded “the continued decline in the ratio of non-performing loans, growth in assets of the banking system and profitability of the industry in the light of increasing global uncertainties.”
It also recognised the success of the apex bank’s loan-to-deposit ratio policy and its potential to alleviate production shortfalls, reduce unemployment and boost aggregate demand.
The MPC urged the CBN to pursue this and other related policies to a conclusive end.
Speaking on the outlook for the domestic economy, Emefiele noted that “based on the current downturn in oil prices, staff projections indicate that output in the 2020 would be less than earlier envisaged.”
The major downside risks to this outlook, he said, include: the continued spread of COVID-19; further decline in crude oil prices and the reduction in accretion to external reserves.
Others are reduced government revenue leading to weak aggregate demand; declining non-oil receipts; as well as infrastructural and security challenges.”
These headwinds he said, “will be partly mitigated by: the timely and effective response of the monetary and fiscal authorities in containing the spread of the COVID-19 viral infection, the recalibration and adjustment of the 2020 Federal Budget to the revised thresholds while pegging expenditure to critical sectors of the economy.”
The MPC also advocated for the “adoption of a new fiscal regime to encourage the build-up of fiscal buffers; sustained CBN interventions in selected sectors; enhanced flow of credit to the real sector and deliberate policies to diversify the Nigerian economy.”
Giving the sharp drop in oil prices, the MPC “reiterated the need for government to urgently reduce reliance on oil revenue by gradually diversifying the economy and improving tax collection.”