11 March 2020: A growing sense of unease and trepidation over how badly the coronavirus outbreak will hit the global economy has left financial markets on edge.

Central banks across the world are pulling the trigger monetary easing to shield their respective economies from the virus outbreak with the Bank of England (BOE) joining the ranks on Wednesday. In a move that caught investors off-guard, the BOE launched its first emergency interest rate cut since the financial crisis.

However, the central banks' unanimous decision to cut interest rates by 50 basis points is more symbolic, as lower interest rates are unlikely to encourage companies to invest or households to save less amid the health crisis. Given how the widening coronavirus outbreak is set to trigger more supply-side shocks, fiscal policy measures could act as a temporary pain reliever before a cure is found.

With the Federal Reserve, Bank of England and other global central banks cutting interest rates, the European Central Bank is expected to join the team on Thursday with a 10-basis point cut.

At this point, the Central Bank of Nigeria (CBN) is unlikely to cut interest rates despite the wave of global easing. The plunge in oil prices has certainly placed Africa’s largest economy on a perilous path filled with uncertainty and danger. WTI Crude and Brent are both trading over 45% lower since the start of 2020, which will most likely hit Nigeria’s foreign exchange reserves and raise speculation around a possible Naira devaluation.

It does not end here. The 2020 budget set the benchmark for Oil at $57 with an Oil revenue goal of N2.64 trillion. Nigeria’s Finance Minister Zainab Ahmad has said that the country would be cutting down on its budget thanks to the sharp decline in Crude Oil prices.

As the MPC meeting looms, investors are questioning what steps the CBN can take to support Nigeria’s fragile recovery. With inflation rising for five consecutive months to 12.13% in January, the CBN could go against the grain by enforcing an interest rate hike if consumer prices accelerates in February.

Source: Lukman Otunuga, Senior Research Analyst at FXTM

Reporting for EasyKobo on Wednesday , 11 March 2020 in Lagos, Nigeria