CBN Govt’s. Address at the Vanguard Economic Summit

It is indeed a pleasure to participate in this
Summit, being organized by the Vanguard
Newspapers and please permit me to express
my deepest appreciations to a man I have great
respect for, the publisher of Vanguard
Newspaper, fondly called Uncle Sam Amuka. I
would also like to thank his management team,
for their relentless efforts towards the success
of today’s event.
Given the external and domestic factors that
are influencing current outcomes in our
economy, I believe this summit presents a
significant opportunity to address critical
stakeholders on events that are shaping our
economy, and the policy responses being
embarked upon by the Central Bank of Nigeria
to support faster economic growth and
continued stability of our financial system.
It is in this light that the theme of today’s
conference “Bankers’ Initiative for Economic
Growth” is appropriate and timely when we
take into account the unprecedented impact of
the COVID-19 pandemic on the global economy
and indeed the Nigerian economy in 2020.
Policy makers across the globe have been
faced with a dual challenge of trying to address
an public health crisis, and a major economic
challenge. Before I speak to the efforts we are
making on both fronts, let me first summarize
the economic spillovers we have suffered from
Economic Impact of COVID-19
As most of us are aware, the spread of the virus
along with the corresponding containment
measures, led to a significant slowdown in
global growth in the first half of 2020. Countries
such as the United States, United Kingdom,
India and South Africa, witnessed contractions
of 9.5 percent, 20 percent, 24 percent and 17
percent respectively in the 2nd quarter of 2020.
Commodity exporting countries like ours also
faced significant revenue challenges as
commodity prices such as crude oil, dipped by
over 65 percent in the 1st half of the year. In
addition, investors pulled over US$100 billion
from emerging market countries in the 1st half of
the year, which resulted in a corresponding
depreciation in the currencies of several
emerging market countries.
Global Response
As a result of the downturn in growth, advanced
and emerging market countries implemented
series of conventional and unconventional
measures, aimed at curtailing the spread of the
virus and stimulating greater economic
recovery. In the United States, the Federal
Reserve acted boldly and swiftly with policy
actions amounting to over US$3 trillion in
liquidity support to households, businesses, and
financial markets,
On fiscal policy front, the US government
committed over $4 trillion to mitigate the effects
on the downturn on households and
businesses. In total, US stimulus measures
amount to close to 35 percent of its GDP. In the
United Kingdom, the Bank of England has so
far committed $1.2 trillion as part of its
quantitative easing program, in addition to fiscal
measures amounting to £280 billion ($375
billion). This is equivalent to roughly 56 percent
of the UK’s GDP. In emerging markets like India
and South Africa, we have seen combined fiscal
and monetary stimulus efforts of close to 15
percent ($400bn) and 10 percent of GDP ($26
billion) respectively. In Nigeria our combined
stimulus measures so far is about US$18
billion, which is close to 4.5 percent of our GDP.
Contrary to expectations by some analysts that
the covid-19 pandemic would lead to a
prolonged downturn in the global economy, they
did not quite envisage the proactive
forcefulness with which policymakers could
r e s p o n d t o t h e c r i s i s . I n d e e d , t h e
unprecedented amount of stimulus, along with
the successful development of several
vaccines, and easing of movement restrictions,
helped to support a robust and faster-thanexpected recovery in the 2nd half of the year.
The United States, India, UK and South Africa
witnessed positive growth of 7.5, 21.9, 16.1 and
13.5 percent respectively in the 3rd quarter of
Notwithstanding these recoveries, most
advanced and emerging market countries
including Nigeria, but with the exception of
China, are expected to see full year negative
growth in 2020. According to the IMF, global
growth is expected to decline by 3.5 percent in
2020 but would recover sharply to a growth of
5.5 percent in 2021. Consequently, 2021 is
expected to be a year active recovery for the
global economy and Nigeria Must not be left
In Nigeria, the onset of the COVID-19 pandemic
in the 1st half of 2020, and the measures put in
place to contain the spread of the virus, caused
a significant shock to our economy. The
downturn in economic activity, which was
particularly significant in the 2nd quarter of the
year, was driven by a series of external factors
such as the drop in commodity prices, outflows
of portfolio funds, supply chain disruptions, in
addition to the lockdown measures imposed, in
order to curtail the spread of the virus.
Consequently, the Nigerian economy contracted
by 6.1 percent in the 2nd quarter of 2020, down
from a positive growth of 1.87 percent recorded
in the 1st quarter of 2020.
The over 70 percent decline in crude oil prices
in the first half of the year, led to a significant
reduction in our foreign exchange earnings.
Today, crude oil prices have recovered from its
low of $19 per barrel in April 2020, and currently
stand at an average of $60 per barrel.
The drop in crude oil earnings and associated
reduction in foreign portfolio inflows significantly
affected the supply of foreign exchange into
Nigeria. In order to adjust for the decrease in
supply of foreign exchange, the naira
depreciated at the official window from N305/$
to N360/$ and now hovers around N410/$.
With the decline in our foreign exchange
earnings and subsequent adjustments in the
value of the naira vis-à-vis the US dollar, the
CBN has continued to implement a demand
management framework, which is designed to
support improved production of items that can
be produced in Nigeria, and further
conservation of our external reserves. These
measures have helped to prevent a significant
decline in our reserves. Our external reserves
currently stand at over $35 billion and is
sufficient to cover more than 7 months of import
of goods and services, even though the
international rule of thumb is for reserves to
cover about 3 months of imports.
On inflation, we note that the general price level
in 2020 have responded to several shocks
including disruption to global and domestic
supply chains as a result of COVID-19, energy
price adjustments, supply/logistic bottlenecks
reflecting insecurity in many parts of the
country, the adjustments in the exchange rate,
which has made imports more expensive. To
this end, headline Inflation rose from 12.26
percent in March 2020 to 16.47 percent in
January 2021.
The rise in inflation along with the need to
implement growth enhancing measures that
would enable the Nigerian economy to emerge
from the recession, continues to pose a
dilemma for policy making authorities.
Research conducted by the CBN notes that the
rise in inflation has been due to cost-push
factors rather than demand pull factors. As a
result, the CBN has placed greater weight on
utilizing tools that would address the shocks to
economic growth, while at the same time
helping to provide facilities that can reduce the
cost-push factors in inflation. Let me now turn to
some of these measures in greater detail.
Response by the Monetary and Fiscal
In response to the impact of COVID-19 on key
economic variables earlier mentioned, the fiscal
and monetary authorities took unprecedented
measures to prevent the economy from going
into a tailspin. Our first objective was to restore
stability to the economy by providing assistance
to individuals, SMEs and businesses that had
been severely affected by the pandemic, as well
as by the lockdown measures. Some of the
measures we took include:
i. A 1-year extension of the moratorium on
principal repayments for CBN intervention
ii. Reduction of the MPR rate by 200 basis
points from 13.5 to 11.5 percent, between
May and September 2020 in order to spur
iii. Regulatory Forbearance was granted to
banks to restructure loans given to
sectors that were severally affected by
the pandemic
iv. Reduction of the interest rate on CBN
intervention loans from 9 to 5 percent
v. Mobilization of key stakeholders in the
Nigerian economy through the CACOVID
alliance, which led to the provision of over
N25bn in relief materials to affected
households, and the set-up of 39 isolation
centers across the country.
vi. Strengthening of the Loan to Deposit
ratio policy, which has resulted in a
significant rise in loans provided by
financial institutions to banking
customers. Credit to the private sector
rose by 17 percent in 2020.
vii. Disbursement of over N204 billion to
447,671 beneficiaries, under the target
credit facility for affected households and
small and medium enterprises, through
the Nirsal Microfinance Bank
viii. Disbursements of over N83.9 billion in
loans to pharmaceutical companies and
healthcare practitioners, to support 81
healthcare projects, which would expand
and strengthen the capacity of our
healthcare institutions.
ix. Disbursements of over N476 bn out of our
N1 trillion facility to support 76
manufacturing and real sector projects,
which would boost local manufacturing
and production across critical sectors.
x. Disbursements of over N260bn to 1.28
million farmers under the Anchor
Borrowers Scheme in 2020 to support
cultivation of key staple items by farmers.
Domestic financial conditions have remained
supportive to growth, due to measures being
implemented by the CBN. Aggregate domestic
credit grew by 17 percent between January and
December 2020, highlighting the effects of the
CBN’s intervention programs, our LDR policy
and accommodative lending rates by the banks.
Non-performing loan ratios have fallen from 6.5
percent in January 2020 to 6.0 percent as of
December 2020.
In the equities market, the Nigeria Stock
Exchange has continued to record positive
performance, as the All-Share Index increased
from 20,098 in April 2020 to 40,270 by
December 2020. The rise in the index is due to
positive sentiments arising from improved
earnings and output by several listed
corporates on the exchange.
These measures have helped to mitigate the
effects of the COVID-19 pandemic on the
economy. As a result, Gross Domestic Product
(GDP) growth had a swift rebound in the 4th
quarter of 2020, as it expanded by 0.11 percent,
after two consecutive periods of negative
The rebound in growth was driven by
Agriculture and ICT, as these sectors grew by
3.42 percent and 14.7 percent, respectively in
the 4th quarter of 2020. Contraction in the
manufacturing sector declined to 1.5 percent
from 8.78 percent in the 2nd Quarter of 2020.
This result is similar to the Manufacturing
Purchasing Managers Index, which stood at
49.6 points in December 2020, indicating a
recovery in manufacturing activities relative to a
low of 43 points in April 2020, even though it
still remained below the 50-point benchmark.
In addition, of the 46 economic activities
tracked by NBS, 31 of these activities expanded
relative to 13 activities in the 2nd quarter of
2020, reflecting continued improvements in
growth. Overall, in 2020, annual growth of real
GDP stood at –1.92 percent, relative to the 2.27
percent growth recorded in 2019.
While the indicators above provide positive
signs that the economy is on a recovery path,
GDP growth at 0.11 percent indicates that the
economy still remains on a fragile recovery
path. It is therefore imperative that we do all we
can in 2021 to ensure that we build on the
positive momentum and strengthen our efforts
at stimulating growth. Let me repeat, with the
discovery and deployment of vaccines, 2021
will be a year of massive global recovery and
Nigeria MUST not be left out.
In order to drive and sustain this recovery
therefore, we need to engage in the following
broad actions:
1)Sustain the accommodative fiscal and
monetary policy measures aimed at
improving access to finance to households
and businesses
2) Prevent a resurgence in COVID-19 related
3) Ensure that a significant number of our
population is properly vaccinated.
4)Improving Foreign Exchange inflows into
the country.
Let me briefly elucidate on these points.
Accommodative Monetary Policy
In 2021 it is imperative that the CBN continue to
provide accommodative monetary policy
measures that will enable faster recovery of the
economy, through improved flow of credit to
households and businesses in key sectors of
the economy such as Agriculture, ICT and
Manufacturing. These measures are essential if
we are return our economy to a sustainable
growth path, while reducing our exposure to
volatility in commodity prices. While
accommodative monetary policy measures that
will support growth remain paramount in our
priorities for 2021, we would continue to pay
attention to trends in inflation, as price stability
is critical in guiding savings and investment
decisions by households and businesses.
As indicated earlier, the agriculture sector was a
key driver in taking the Nigerian economy away
from negative growth in the 4th quarter of 2020.
It is important that we not only sustain
measures aimed at increasing productivity of
the sector, but also ensure that we continue to
produce items that can be produced locally
rather than resorting to imports of these items.
More importantly our agricultural sector also
offers significant opportunity for the nation to
earn foreign exchange through the exports of
processed agricultural products. Over the next
3 years, we will continue to encourage the
banking sector to increase its loans to the
agriculture sector from 4 percent to 10 percent
by 2024.
We are also pursuing an in-depth restructuring
of the Nigeria Commodities Exchange Board in
order to improve access to finance as well as
productivity for stakeholders in the agriculture
sector. With enhanced logistics and the
provision of warehouse receipts through the
Commodities Exchange, farmers will be able to
access finance, expand production and supply
needed goods to off-takers.
I n f o r m a t i o n a n d C o m m u n i c a t i o n s
Another sector which has emerged as a
significant source of resilience in mitigating the
impact of COVID-19 on the economy, is
Information and Communications Technology
(ICT). In the 4th quarter of 2020, the ICT sector
made contributions of over 14.70 percent to
GDP growth, 4 percent points higher than its
contributions a year earlier.
The Central Bank in 2021would seek to
encourage banks and other financial institutions
to leverage ICT in improving penetration of
financial services to households and SMES,
while supporting productivity across key sectors
in the economy.
Infrastructure Finance
With the decline in revenues due to federal and
state government, alternative ways of funding
infrastructure are critical if we are to generate
sustained growth of our economy. As we are all
aware, a well-built infrastructure system can
have a multiplier effect on growth by enabling
the expansion of business activities in the
That is why I am delighted that Mr. President
has continued to give all the necessary
approvals and support to establish the
Infrastructure Corporation of Nigeria Limited.
InfraCorp will be co-owned by the CBN, the
African Finance Corporation and the Nigerian
Sovereign Investment Authority and would
become fully operational by the second quarter
of 2021. This vehicle would enable the use of
private and public capital to support
infrastructure investment that will have a
multiplier effect on growth across critical
Improving Foreign Exchange Inflows
Non-Oil Exports
The CBN intends to support measures that will
improve our non-oil export earnings
significantly. As a result, we intend to
aggressively implement our N500 billion facility
aimed at supporting the growth of our non-oil
exports, which will help to improve non-oil
export earnings. Exporters will be further
encouraged to repatriate their export proceeds
as stipulated under our extant laws. The CBN
will continue to ensure that exporters have
unfettered access to their export proceeds.
The CBN has already taken several measures
to increase the flow of diaspora remittances into
the country using formal channels. In December
2020, we instructed all international money
transfer operators (IMTOs) to provide remitters
with the option of sending foreign exchange to
beneficiaries in Nigeria. This new measure has
helped to reduce the diversion of fx by some
IMTOs, who had thrived from fx arbitrage
arrangements, rather than on improving
transactions volumes to Nigeria. Indeed, we
have already seen remittances improve from a
weekly average of about US$5 million before
this policy, to over US$30 million per week. We
believe this measure will help to significantly
boost inflows of FX and create much more
liquidity in that space.
Distinguished ladies and gentlemen, in
concluding my remarks, let me add that while
the effects on COVID-19 has brought on
several challenges to our economy, it also
offers a unique opportunity for us to build a
more resilient economy in 2021 that is better
able to contain external shocks, whilst
supporting growth and wealth creation in key
sectors of our economy. Proactive steps on the
part of stakeholders in the banking and financial
system in supporting the growth of sectors such
as Agriculture, ICT and Infrastructure, will
strengthen our ability to deal with the
challenges that have been brought on by
COVID-19, and stimulate the growth of our
I thank you for your attention.
Godwin I. Emefiele (CON)
Governor, Central Bank of Nigeria
26 February 2021