The Central Bank of Nigeria (CBN) is considering interest rate cut to stimulate growth and protect the economy, its Governor, Godwin Emefiele, has said.
Speaking at the Going for Growth Session held at the weekend in Abuja, the CBN boss explained that central banks in key markets across the globe have responded through interest rate cut to stimulate growth, while measures are being taken by fiscal authorities to build resilient buffers to contain the spread of the coronavirus.
He said the event was more relevant now than ever before, given the external headwinds that the economy faces, such as the effects of the trade and technology wars, and more importantly the recent spread of the coronavirus, which has emerged as a major threat to global growth in 2020.
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He 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.”
According to Emefiele, the International Monetary Fund (IMF) had early this year, projected that global growth would rise to 3.3 per cent in 2020, up from 2.9 per cent in 2019.
“However, with the onset of the virus, global growth is expected to decline in 2020, but the extent of the decline would depend on how the epidemic is contained over the next few months,” he said.
Emefiele said one of the critical measures that helped to boost growth last year, was the impact of the CBN’s new minimum loan to deposit ratio, which was initially at 60 per cent, and subsequently raised to 65 per cent.
“We 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,” he said.