Adamu Edward, a member of the Monetary Committee (MPC) has hinted that there are no quick fixes for the economic challenge Nigeria and most countries currently face as a result of the covid-19 pandemic.
Adamu who is currently Deputy Governor of the Central Bank of Nigeria (CBN) made this submission in September, 2020 MPC communique with personal statements of members.
The CBN Deputy Governor also recognised that fiscal space influence on the economy is limited due to revenue pressure.
In his assessment, Adamu who is also became the Chairman for the Asset Management Corporation in December, 2020 detailed that the global economy continues to be heavily challenged by the fallouts of the COVID-19 pandemic and commodity price volatility.
He stated that although economic activities have resumed in all parts of the world and fast regaining momentum, the effects of the extreme measures deployed to counter COVID-19 would take a bit of time to dissipate fully.
“In fact, second quarter 2020 output figures for most countries showed higher magnitudes of contraction than expected”, he added.
Amidst high risks and uncertainty, he noted that the Organization for Economic Cooperation and Development (OECD) sees global growth contracting by about 4.5 per cent while the International Monetary Fund (IMF) now projects a 4.9 per cent contraction in 2020 with prospects of early recovery in 2021.
He explained that both institutions agree that building confidence will be crucial for early and robust recovery.
Already, global trade, one of the major casualties of COVID-19 lockdowns and movement restrictions, has commenced recovery – it grew from -12.3 per cent in April 2020 to 7.6 per cent in June 2020.
Adamu posited that businesses have remained broadly cautious of the possibility of a second-round pandemic even as production lines and supply chains are rapidly reopening.
Meanwhile, commodity exporting countries continue to face additional uncertainty arising from commodity price instability.
For Nigeria, Adamu said low and volatile oil prices continue to be a major cause for concern, just as it is for most OPEC Member Countries.
Across the globe, public budgets have been thrown into massive deficits and pressure on monetary authorities for accommodation has intensified, especially in emerging markets and developing economies (EMDEs).
According to Adamu, global inflation has remained muted, reflecting mainly, below-target-inflation in advanced economies especially, which has made it more convenient for central banks in those economies to sustain massive injections of liquidity.
“In the group of emerging market and developing economies, inflation pressures have tended to grow largely on account of depreciating exchange rates and rising energy costs in some cases.
“Nonetheless, most central banks in this clime, including the Central Bank of Nigeria (CBN), have continued to support demand and confidence by preventing a tightening of financial conditions.
“It must be emphasized that the current domestic economic slowdown is not the regular boom-burst cycle of activity; in fact, the Nigerian economy was barely recovering from the 2016 slowdown when COVID-19 struck.
“The consequential lockdown and movement restrictions suddenly halted most economic activities.
“Yet, even as activity should logically resume in the affected sectors as the lockdowns and movement restrictions are eased, there is no gain saying that some kind of fiscal push will be required”, CBN’s Deputy Governor added.
However, owing to the narrow fiscal space at the present, Adamu explained that the greater burden of providing that critically needed support has to be borne by the CBN, very much like most monetary authorities have done and are still doing.
Adamu stated in his submission that there are preliminary indications that the development finance interventions by the Bank are having the desired effect and should therefore, be sustained and possibly deepened in the short- to medium-term
Source: Market Forces