MPC members warn against another nationwide lockdown

MEMBERS of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria have advised the Federal Government to avoid   an  entire   nationwide   lockdown   like was experienced  in   2020, as   this   will   reverse   the gains   jointly   achieved by the government and the central bank through the response to the outbreak of  COVID-19 pandemic.

Accordingly, the committee also observed that gross banking sector credit at end-March 2021 stood at N23.53 trillion compared to N22.68 trillion at end-December 2020.

This represents an increase of N85 billion (year-to-date), of   which   commercial and merchant   banks   disbursed (66 billion),   microfinance   banks   (N13 billion), development  finance   institutions   (N05 billion),   and primary mortgage banks and finance companies (N1 billion).

The MPC met on May 24 and 25, 2021, as the global economy gradually emerges from the six-quarter long COVID-19 pandemic with lingering uncertainties. The recovery is on account of widespread vaccinations, easing of restrictions, reopening   of   economies   and   gradual   return   to international travels.

India and Brazil, however, continue to battle high levels of infections and fatalities resulting from   mutating   strains   of   the   virus.   In   the   domestic environment, the   economy   is   expected   to   remain   on the current trajectory of recovery in 2021, mirroring the cautious optimistic trend in global output recovery.

The Committee in a communique issued at the end of the meeting reviewed developments   in   the   global and domestic economic and financial environments in the second quarter of 2021 and the outlook for the rest of the year.

The Committee members  applauded  the government’s efforts    in   combating   the   headwinds   imposed   by   the pandemic and urged that going forward, it should   avoid   an   entire   nationwide   lockdown   like   was experienced   in   2020,   as   this   will   reverse   the wholesome   gains   jointly   achieved   by   the government and the central bank through response to the outbreak of the pandemic.

The MPC carefully assessed the options on direction of policy   in   the   short   to   medium   term.   It   re-appraised current   measures   by   the   government   to   purchase COVID-19   vaccines   and   the   general   preparedness   of public   health   agencies   to   guard   against   the spread of the mutating strains of the virus.

“To this end, the   Committee noted   the appropriate steps   taken by the government to ensure that up to 70 per cent of the populace get vaccinated to drastically drive down the infection rate  in the country  and hence, sustain economic activities.

“The   Committee   noted   the   persisting   security   crisis, especially   in   major   food   producing   regions   of   the country and the severe toll on food supply and prices. It noted that inflation had moderated marginally,” the communique read in part.

Meanwhile, it noted that  the liquidity   condition   in   the   banking   system   in   the review period was  determined by  several  factors including;   fiscal   disbursements   and   withdrawals   by states   and   local   governments,   periodic  Cash Reserve Ratio (CRR )  debits,  foreign   exchange   interventions,   Open   Market Operations,  and  maturing  CBN  bills,  the  net  effect   of which   imposed   liquidity   constraints   on   the   banking system.

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