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Nigerian banks still strong despite COVID-19 impact – CBN Governor

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THE Central Bank of Nigeria (CBN) Governor, Godwin Emefiele has said that the country’s banking industry is still resilient and strong to support the country’s economy despite the ravages of the COVID-19 pandemic.

  Mr Emefiele, who spoke at the end of the Monetary Policy Committee (MPC) meeting in Abuja, on Tuesday, said the various interventionist activities of the apex bank helped to significantly mitigate the impact of the COVID-19 pandemic on businesses and households as well as reduce the level of contraction in the economy.

  The Nigerian economy grew at about 1.87 per cent in the first quarter of 2020. However, following the outbreak of the pandemic and its devastation of the global economy, analysts projected the Nigerian economy to contrast by about 7.4 per cent in the second quarter.

  The gross domestic products (GDP) report published by the National Bureau of Statistics (NBS) early this month put the contraction at -6.1 per cent.

  “The impact of the CBN interventionist activities has been positive, without which the positive GDP growth recorded in the first quarter of the year prior to the pandemic would not have been possible, neither would the somewhat reduced contraction of the economy to -6.1 per cent in the second quarter against projections of over -7.4 per cent have been possible,” Mr Emefiele said.

  Meanwhile the CBN says it has cut lending rate to 11.5% amid looming recession. The bank’s Monetary Policy Committee (MPC) has resolved to tweak its controlling lending rate while retaining its liquidity ratio and cash reserve requirement, to make more money available for lending to critical sectors as the economy braces for a looming recession in the third quarter.

  At the end of its September meeting, the MPC said the majority of its members voted to reduce the monetary policy rate (MPR) by 100 basis points, from 12.5 per cent to 11.5 per cent, while adjusting its symmetric corridor around the MPR from +200 and -500 basis points to +100 and -700 basis points.

  Also, the committee decided to retain the cash reserve requirement (CRR) at 27.5 per cent and liquidity ratio at 30 per cent.

  The CRR is the funds kept with the CBN as a minimum deposit a commercial bank must hold as reserves, rather than lend out to customers, while liquidity ratio is the portion of assets that can easily be exchanged for money compared to the total assets of a bank or other financial institutions.

  With the country’s economy primed to relapse into another recession come the third quarter of the year as a result of the negative impact of COVID-19 pandemic, the MPC said the decision to cut the lending rate was informed by the need to “provide cheaper credit to critical sectors, improve aggregate demand, stimulate production, reduce unemployment and support the recovery of output growth.”

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