Central Bank of Nigeria (CBN) Governor Godwin Emefiele while speaking Friday at the 55th Annual Bankers Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, predicted a 2% growth in the country’s Gross Domestic Product (GDP) in 2021.
Emefiele, who spoke at the 55th Annual Bankers Dinner in Lagos, anticipated that with sustained implementation of the central bank’s development finance initiatives, as well as efforts from the fiscal authorities, the Nigerian economy could emerge from recession by the first quarter of 2021.
Nigeria’s real GDP contracted for the second consecutive quarter by 3.62% in the third quarter of the year, compared to a growth of -6.1%, which showed that the country had entered its second economic recession in five years.
But Emefiele assured his audience who were mostly bankers and investors that just like policymakers did in 2016 when the economy slipped into recession, the fiscal and monetary policy managers would join forces to address the present economic challenge.
He reiterated his call for analysts to always give out accurate figures and indicators on the economy so as not to cause panic or mislead potential investors.
“We also expect that growth in 2021 would attain 2%. However, downside risks remain, as restoration of full economic activities, particularly in service-related sectors, remains uncertain until a Covid19 vaccine is produced and made available to millions of people across the world.
“Second, with the significant rise in cases in advanced markets and the imposition of lockdowns in parts of Europe, concerns remain on the impact this could have on growth in advanced economies, commodity prices and the financial markets.
“We must therefore find ways to insulate our economy from the impact of these shocks through our diversification efforts, while also working to ensure that we adhere to safety protocols in order to prevent a surge in Covid-19 related cases, as this could further cripple economic activities,” he explained.
According to Emefiele, actions by the CBN in 2021 would be guided by considerations that emerged from the Monetary Policy Committee meeting held last week, which sought to address the major headwinds exerting downward pressure on output growth and upward pressure on domestic prices.
He noted that given the fact that the rise in inflation was not due to monetary factors but rather the prevalence of structural rigidities and supply shocks, traditional tools of monetary policy may not be helpful in addressing current inflationary pressures. Rather, he said a more useful policy would be the supply-side measures implemented by the Bank.
Owing to this, Emefiele said emphasis would be placed on strengthening the development finance initiatives of the CBN in order to stimulate greater production and reduce unemployment.
“We intend to increase our support for measures that will improve cultivation of local produce in Nigeria, with particular emphasis on improving our yield levels, as food inflation continues to remain the key driver of inflationary trends.
“The banking sector therefore has a significant role to play as a facilitator of growth in the agriculture sector, through its intermediation function.
“Some of the opportunities in the agriculture sector that banks should explore include ways to address some of the existing gaps in the agriculture value chains, such as storage centres, transport logistics, and technology platforms, that can enable rural farmers to sell their produce directly to the markets.
“These measures would help to improve productivity of farmers, reduce post-harvest losses, increase access to finance for farmers and improve sourcing of local raw materials for processing by manufacturing and industrial firms.
“It will also aid improved production of local goods, enable the creation of jobs, while supporting the growth of other sectors of our economy such as manufacturing, and transportation,” Emefiele said.
He stressed that the information communication technology (ICT) remains one sector which has emerged as a significant source of resilience in mitigating the impact of COVID-19 on the economy.
He pointed out that in the third quarter of 2020, the ICT sector made contributions of over 17.8 per cent to GDP growth, 47 per cent higher than its contributions a year earlier.
The growth of start-ups in the fintech and health care space rose in response to the pandemic.
“It is important that we leverage ICT as an enabler for growth in key sectors of the economy. ICT start-ups are emerging to support SMEs, farmers, and in providing quality learning to students.
“It is important that the banking sector consider viable IT firms in these areas that have the potential to not only serve the needs of the local market but are also able to export ICT related services to countries across the world.
“India for example exports close to a $100 billion worth of ICT related services every year and I believe that our ICT industry can make significant contributions to our export earnings,” Emefiele added.
According to him, the central bank recently issued payment service bank licences to three firms as part of efforts to drive financial inclusion and ensure that majority of Nigerian citizens are banked.
Emefiele said the payment service banks, along with mobile money operators and banks are expected to leverage ICT channels in improving penetration of digital financial services and products to Nigerians.
He pointed out that driving sustainable growth in the economy would require that the banking industry support growth of ICT firms that are inclined to improve productivity across key sectors in the economy.
Another critical area that the banking sector ought to consider for stable growth of our economy is infrastructure finance, the CBN Governor said.
According to Emefiele, with the decline in revenues due to federal and state government as a result of the drop in crude oil prices, alternative ways of funding infrastructure are critical in generating sustained growth of in the economy.
“A well-built infrastructure system, comprising hard infrastructure such as roads and ports, and soft infrastructure such as broadband penetration, can have a multiplier effect on growth by enabling the expansion of business activities in the country.
“We believe that a well-structured infrastructure fund can act as a catalyst for growth in the medium and the long run. The support of the banking community will be important in achieving this objective.
“Let me add that while Covid-19 has brought on several challenges to our economy and indeed the banking sector, it offers a unique opportunity for us to build a more resilient economy that is better able to contain external shocks, whilst supporting growth and wealth creation in key sectors of our economy,” he added.
In his remarks, the Governor of Lagos State, Mr. Babajide Sanwo-Olu, assured business operators in the state of the safety of their investments.
He said the state learnt a lot from the recent #ENDSARs protest, even as he thanked banks for supporting the state during the Covid-19 lockdown.
Speaking about the recent protest, Sanwo-Olu said: “Unfortunately, a protest that we supported turned out to cause a great havoc on our land as Lagos became the epicenter.
“But it is important for me to say while some of your businesses were also affected, we want to say to you that security of lives and properties would continue to be a deliverable that we would not shy away from.
“We would be hard on it and we would ensure that we protect your investment. We do not pray for a repeat of what saw last month. We have learnt our lessons and we would continue to engage to come out stronger.”
Festus Akanbi, Obinna Chima