Nigeria runs risk of ‘CBN-induced’ recession – NGF

The Nigeria Governors’ Forum on Sunday warned that the Central Bank of Nigeria‘s naira redesign policy could have disastrous effects on the nation and potentially lead to economic recession.

The governors, across party lines, disclosed this in a communique signed by the NGF chairman, Governor Aminu Tambuwal of Sokoto State, at the end of their meeting on Saturday in Abuja.

The NGF noted that the people’s inability to use the new notes has led to severe economic consequences, including the emergence of a black market, food inflation, variable commodity prices, long lines and crowds around ATMs.

“The country runs the risk of a CBN-induced recession,” the NGF said.

The naira redesign policy was introduced as part of the apex bank’s efforts to check inflation, counterfeiting, and corruption. But since the rollout of the policy, Nigerians have had a hard time getting cash for their daily transactions due to scarcity.

With millions of Nigerians unable to access cash, economic activities have slowed in the past month with businesses and households lamenting the hardship in the country.

The NGF advised that the slowdown in economic activities could result in a recession, a condition when a country’s economy declines contracts for two consecutive quarters.

Nigeria slipped into its last recession in the third quarter of 2020, due to the impact of COVID-19 on travel and supply-chain of goods around the world. But by the fourth quarter of 2020, the nation slipped out of recession as the GDP grew by 0.11 per cent.

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Earlier, the nation experienced its first recession in over two decades in 2016, when the economy contracted by 1.6 per cent due to negative oil prices.

The NGF in its statement said that to deploy a cashless policy and deepen digital transactions, the best practice around the world is to create incentives to attract customers, rather than the ‘draconian approach’ being deployed in Nigeria.

The governors also dismissed the argument by the CBN that the astronomical increase in currency in circulation is the basis for its policy.

It added that the CBN did not consider the increase in the country’s nominal GDP over this period, the doubling of consumer prices, the rising population, and the impact of the Ways & Means advances on the federal government by the CBN.