CBN to announce lending rate as Nigeria economy faces stagflation

As the Nigerian economy faces stagflation amid rising unemployment, run-away inflation rate, high food prices and lower economic output, the Central Bank of Nigeria’s Monetary Policy Committee would Tuesday announce what monetary policy action it has taken.

The decision made at the MPC meeting, which began Monday, would be announced by CBN governor Godwin Emefiele Tuesday afternoon.

A press briefing would be held by 2:15pm Tuesday, the CBN said on its Twitter page Tuesday morning.

Analysts expect that the committee would look into Nigeria’s and global vaccination efforts to curb Covid-19, Nigeria’s inflationary pressures, unemployment, and sundry developments in the equities and fixed income markets.

‘Stagflationary concerns’

Stagflation is typically characterised by increase in prices which occur when there is an increase in inflation rate, rising unemployment, high misery index, and lower economic output.

Nigeria’s  inflation rate rose to 17.33 per cent in February 2021, from 16.47 per cent in January.

The NBS said in its report that food inflation rose to 21.79 per cent in February, compared to 20.57 per cent recorded in January 2021, the highest point since the data series began over a decade ago.

The prices of food rose earlier in the month when a blockade was announced by food and cattle suppliers.

The blockade led to a sharp rise in the prices of beef, foodstuff and vegetables, worsening Nigeria’s runaway food inflation.

In March, the nation’s statistics bureau said Nigeria’s unemployment rate rose to 33.3 per cent, translating to some 23.2 million people, the highest in at least 13 years and the second-highest rate in the world.

The figure jumped from 27.1 per cent recorded in the second quarter amidst Nigeria’s lingering economic crisis made worse by the coronavirus pandemic.

Unemployment rate in the country has more than quadrupled since 2016 when the economy slipped into a recession. A second recession occurred in 2020.

Nigeria’s economy limped out of recession in the fourth quarter of 2020, recording its first but weak growth in three quarters as coronavirus-linked lockdown was lifted across the country.

The NBS said at the time that Gross Domestic Product (GDP) grew 0.11 per cent in the three months between October and December from a year earlier.

The economy had slipped into recession in the third quarter of 2020 with a decline of 3.6 per cent, having contracted 6.1 per cent in the second quarter, leading to Nigeria’s second recession in five years.

Outlook

The MPC is expected to look into domestic and external macroeconomic concerns and financial markets developments since its last meeting. It is also expected to provide direction on how it intends to ensure exchange rate stability.

In its last meeting in January, the committee retained its benchmark lending rate at 11.5 per cent and held other monetary policy parameters.

Mr Emefiele said the decision to retain the benchmark rate at the first MPC for the year was “unanimous”.

The regulator also left the Cash Reserve Ratio for commercial banks at 27.50 per cent and liquidity ratio at 30 per cent.