CBN says Nigeria’s economy may slip into recession

The Central Bank of Nigeria (CBN) has warned that the countrys economy may slip into a recession given the weak economic fundamentals currently being shown.

CBN governor, Godwin Emefiele, disclosed this to journalists at the end of a two-day meeting of the Monetary Policy Committee in Abuja on Tuesday, September 25, 2018.

The Nigerian economy had exited recession in 2017 after suffering contraction for five consecutive quarters.

Emefiele said the Nigerian economy has again started showing signs of weakness.

The CBN governor said the committee was concerned that there was a fresh threat of recession as the economy recorded growth rate of 1.95 per cent and 1.5 per cent during the first and the second quarters of this year, respectively.

Emefiele blamed the slowdown on the oil sector, with strong linkages to employment and growth.

He said the late implementation of the 2018 budget, weakening demand and consumer spending, rising contractor debts, and low minimum wage were some of the risks to output growth.

Others, according to him, are the impact of flooding on agricultural output, continued security challenges in the north-east and north-central zones, and growing level of sovereign debts.

“The MPC observed that despite the under-performance of key monetary aggregates, headline inflation inched up to 11.23 per cent in August 2018 from 11.14 per cent in July 2018," Emefiele said.

“The near time upside risks to inflation remain the dissipation of the base effect expected from 2019 election related spending, continued herdsmen attacks on farmers and episode of flooding, which destroyed farmlands and affected food supply ultimately.

“In this regard, the committee urges the fiscal authorities to sustain implementation of the 2018 budget to relieve the supply side growth constraints so that they can address the flooding, which has become perennial on a permanent basis.

“Relative stability has returned to the foreign exchange market buoyed by the robust external reserves, with inflation trending downward for the 18th consecutive month.

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“The gains so far achieved appeared to be under threat following the new data, which provides evidence of weakening fundamentals. The committee identified rise in inflation and pressure on the external reserves created by the capital flows reversals as the current challenges to growth.

“It noted that the underlying pressures have started rebuilding and capital flows reversals have intensified as shown by the bearish trend in the equities’ market even though the exchange rate remains very stable.

“The committee was concerned that the exit from recession may be under threat as the economy slid to 1.95 per cent and 1.5 per cent during the first and the second quarters of 2018, respectively.

“The committee noted that the slowdown emanated from the oil sector with strong linkages to employment and growth.”

The CBN governor said the effective implementation of the 2018 budget and policies that would encourage credit delivery to the real sector of the economy might boost aggregate demand, stimulate economic activity and reduce unemployment in the country.