Recession: CBN retains key lending rates at 11.5%

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The Monetary Policy Committee (MPMPCog the Central Bank if Nigeria (CBN) has retained key lending rates at 11.5%.

Governor of the CBN, Mr Godwin Emefiele, announced this on Tuesday, saying it was part of efforts to boost economic growth of the country.

This is coming days after National Bureau of Statistics (NBS) reported that Nigeria had slid into a second recession in five years.

Emefiele, who said that recession was anticipated, explained that measures were put in place to manage its impact.

The NBS, according to the Federal Ministry of Finance, Budget and National Planning in its rationalisation of the recession report, said that the economy would witness a v-shape recovery.

It stated that “Last Saturday, the NBS published the 3rd Quarter (Q3) 2020 Gross Domestic Product (GDP) estimates, which measure economic growth.

“Nigeria’s GDP declined by -3.62% (year-on-year) in real terms in the third quarter of 2020, following a much larger contraction of -6.10% in Q2 2020.

“Following the traditional definition, this second consecutive contraction in GDP means the Nigerian economy officially entered a recession at the end of Q3 2020, as the impacts of the COVID-19 pandemic, and the national response to contain its spread, manifested across several sectors of the economy.

“Consequently, for the first three quarters of 2020, real GDP declined by –2.69% (year-on-year).

“In a clear signal of improving economic conditions however, 17 activities recorded positive real growth in the third quarter compared to 13 in the preceding quarter.

“At the same time, 36 of 46 economic activities did better in Q3 2020 than Q2 2020.

“The oil sector was largely responsible for the slow-down in economic activity in Q3 2020 as it recorded a sharp contraction of -13.89% in Q3 2020 year on year, the largest decline in that sector in 14 quarters.

“The slow-down in global economic growth and oil demand consequent upon the COVID-19 pandemic, as well as our obligations to meet OPEC cuts, were principally responsible for the slowdown in the performance of the oil sector.”

It further painted an optimistic picture of how shallow the recession would be and how v-shaped rhe recovery would be for the Nigerian economy.

According to the Ministry, “While the decline of -3.62% (for 2020 Q3) and -2.69 percent (for the first 9 months of 2020) are unfavourable, it was better than the -6.01% earlier forecast by the National Bureau of Statistics, and outperformed outturns from several domestic and international forecasts.

“Furthermore, this COVID-19 induced recession follows the pattern across the world where many countries have entered similar economic recessions.

“You will recall before the impact of COVID-19, the Nigerian economy had been experiencing sustained growth which was improving every quarter until Q2 2020 when the impacts of COVID-19 started to be felt.

“Other countries already in recession like Nigeria include: Austria, Belgium, Canada, Denmark, Estonia, Finland, Hungary, Ireland, Italy, Latvia, Lithuania, Mexico, Netherlands, Norway, Romania, Russia, Spain, UK, and USA.

“Most of these countries has recorded contractions much deeper than the Nigerian economy.

“It is also expected that South Africa that recorded a decline of over -50% in Q2 2020 compared to Nigeria of -6.10% will also enter a recession once its Q3 2020 results are announced.

“While the economy entered a recession in Q3 2020, the trend suggests this will be short-lived and by the end of the fourth quarter, we will return to positive growth.

“The exit from recession, it is anticipated, would be earlier than Q2 2021 forecast by the National Bureau of Statistics and some other domestic and international analysts. You will recall that the 2016 recession lasted for 5 quarters but, if trends continue, the current recession should last just one quarter.

“Our expectations of a quick exit, which would be historically fast, is anchored on the several complementary fiscal, real sector and monetary interventions proactively introduced by government to forestall a far worse decline of the economy, and alleviate the negative consequences of the pandemic.

“While there is always a lag between intervention and outcome, we can already see benefits on the economy as recorded in the better-than-expected results for Q3 2020.”

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