- CBN: Output growth declined by 2.47% in 2015
Federal Government yesterday raised alarm that Nigeria is broke and that the economy is on the brink of total collapse. This is coming as the Central Bank of Nigeria, CBN, also revealed that Nigeria’s output growth declined by 2.47% in 2015.
The Minister of Information and Culture, Lai Mohammed, revealed this shocking news yesterday while responding to questions from newsmen on the new fuel hike after the Federal Executive Council (FEC) meeting chaired by President Muhammadu Buhari at the Presidential Villa, Aso Rock.
Mohammed stated that the hike from N86.50 to N145 happened because Nigerian is broke stressing that it “is not about subsidy removal. It is about the fact that Nigeria is broke. The economy is shrinking.”, he said and further maintained that the Federal government does not have foreign exchange to import fuel.
Lai Mohammadu accompanied by the Attorney General of the Federation, AGF and Minister of Justice, Abubakar Malami and Minister of Power, Works and Housing, Mr. Babatunde Fashola and Labour Minister, Dr. Chris Ngigie said that Nigeria’s foreign earning had dwindled and that it became apparent for the government to look inward and part of that was the hike in fuel.
“The current problem is not really about subsidy removal. It is about that Nigeria is broke. Pure and simple! “It is like somebody who has been earning N100,000 a month and he is faced with a situation where his employer says henceforth you will be earning N10,000 a month. He would need to make some very painful decisions and some very painful adjustments. That is the situation with Nigeria today. “A few months ago, we were earning as much as $100 for every barrel of crude. In the months of February and March, we were short so, we no longer have the resources, the foreign exchange to bring in refined fuel products. And our economy is shrinking. “We appreciate the fact that the decision is going to affect everybody. We appreciate what we are going through, but Nigerians should also know that the government has the responsibility at times to take very difficult decisions. So, it is not always about popularity.”
Output growth declined by 2.47% in 2015- CBN
Meanwhile, Central Bank of Nigeria, CBN has stated that Nigeria’s output growth declined to 2.47 per cent in the year 2015. This was noted at the financial stability report published by the apex bank yesterday.
It also noted that broad money supply increased, while the gross official reserves fell adding that the average exchange rate depreciated at the inter-bank and BDC segments. Year-on-year inflation rate edged up slightly to 9.6 per cent in the review period.
Governor of CBN, Godwin Emefiele who commented on the report said that weak outlook forced the monetary policy institution to tighten the system. According to Emefiele, “Given the above scenario, the key task that faced monetary authorities in Nigeria in the reporting period centred on the use of effective policy tools to ensure that the shocks arising from instability in the global economy were not fully transmitted to the domestic economy.”
The CBN report stated that global output growth remained weak in the second half of 2015 as evidenced by the decline in projected output growth to 3.1 per cent, lower than the 3.4 per cent recorded in 2014. The decline was attributed to the general slowdown in economic activities in emerging markets and developing economies, China’s rebalancing of economic activities away from investment and manufacturing to consumption and services, declining oil and other commodity prices and the gradual tightening of US monetary policy.
In the second half of 2015, average interest rates fell in response to the liquidity situation in the economy. Broad money grew by 5.90 per cent. Also, narrow money (M1) increased by 24.14 per cent at end-December 2015, as against the 5.25 per cent decline at the end of the first half of the year.
According to CBN the Monetary Policy Rate (MPR) was reduced to 11.00 percent and the symmetric corridor of 200 basis points around the MPR was made asymmetric at + 200 basis points and -700 basis points for standing lending and deposit facilities, respectively. In reaction, rates at the inter-bank funds market fell in the review period. These measures were to encourage banks to lend to the real sector of the economy. The intervention measures of the CBN were also sustained to enhance inclusive growth in the real sector.
The report also disclosed that the quality of assets in the banking sector declined marginally in the second half of 2015 compared to the position at end-June 2015. The decline in asset quality was attributed to the unfavourable macroeconomic environment in the review period. Also, capital adequacy weakened during the period. This was attributable to the fall in the level of banks’ general reserves. A stress test of the banking industry revealed that, generally, it remained relatively resilient, although some banks were sensitive to credit concentration and interest rate risks which did not pose systemic threats to the industry.
The apex bank however, said it continued to process customers’ complaints with a view to enhancing public confidence in banks. The payments system witnessed significant developments with the implementation of the Bank Verification Number BVN Scheme. The Treasury Single Account (TSA), an initiative aimed at reducing the cost of government borrowing, better management of cash resources, and harmonized government receipts and payments, was fully implemented.