The Central Bank of Nigeria (CBN’s) Monetary Policy Committee yesterday cautioned the fiscal authorities on the increasing sharing of of crude oil proceeds by the three tiers of government in view of the need to save and stabilize the economy against future oil price related shocks.
This advice was among the key decisions taken by the committee at the end of its two-day meeting held in Abuja.
While noting that the nation’s economic remains fragile but holds strong potential for growth, the committee expressed serious concern about the increasing monetization of oil proceeds as evident in the growing FAAC distribution, relative to the 2017 level of disbursements.
It therefor urged “the Government to initiate strong stabilization programmes and to freeze the growth in its aggregate expenditure and Federation Account Allocation Committee (FAAC) distributions.”
The CBN Governor, Mr. Godwin Emefiele, who briefed the media on the various issues considered at the meeting and decisions taken, noted that “forecasts of key macroeconomic indicators give a positive outlook for the Nigerian economy in 2018.”
He hinged the committee’s forecasts “on the quick passage and effective implementation of the 2018 budget, improved security, foreign exchange market stability as well as favourable crude oil prices.”
According to him, the committee “noted the potential impact of the 2019 election- related spending, against the weak backdrop of tax revenue efforts, herdsmen related violence and rising yields in the advanced economies. Indications in the US and the UK point to higher interest rates in the short to medium term” as well as the gradual return to macroeconomic stability as reflected in the third consecutive quarterly growth in real GDP in the fourth quarter of 2017.
While also noting the continued moderation in all measures of inflation as well as sustained stability in the naira exchange rate, the committee urged the CBN to sustain the stability to avoid a mission drift.”
On the fiscal side, Emefiele commended the government for continuing to settle its outstanding liabilities, reducing its domestic debt profile, thus increasing the liquidity of the banking system.
At the conclusion of its deliberations, the CBN Governor disclosed that the MPC voted unanimously to retain the MPR at 14.0 per cent; Cash Reserve Ratio (CRR) at 22.5 per cent; Liquidity Ratio at 30.0 per cent; and Asymmetric corridor at +200 and -500 basis points around the MPR.
The Committee noted that at 14 per cent, the policy rate was tight enough to rein-in current inflationary pressures.