The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) today retained the Monetary Policy Rate (MPR) at 14 per cent and left other ratios intact at the conclusion of its two-day meeting in Abuja.
In addition to the MPR which was retained at 14 per cent, the committee also retained the Cash Reserves Ratio (CRR) at 22.5 per cent as well as Liquidity Ratio at 30 per cent; and the Asymmetric Window at +200 and -500 basis points around the MPR
The Governor of the CBN, Godwin Emefiele, at a media briefing on the issues discussed at the meeting and decisions taken, disclosed that the committee member decided to retain the MPR and others in order to consolidate on the recent micro and macroeconomic trajectories recorded in the economy.
Specifically, Emefiele, who is also the Chairman of the committee cited the gradually decelerating inflation rate, the foreign reserves growth and positive performances in key sectors of the economy as some of the reasons for the decisions taken by the committee.
The CBN Governor assured that the apex bank would continue to sustain measures that will support sustained growth in key sectors.
He explained: The Committee noted with satisfaction the gradual return to macroeconomic stability as reflected in the third consecutive quarterly growth in real GDP in the fourth quarter of 2017. It also noted the continued moderation in all measures of inflation as well as sustained stability in the naira exchange rate and urged the Bank to sustain the stability to avoid a mission drift.
“In particular, the Committee welcomed the narrowing of the exchange rate premium between the BDC segment and the Investors’ and Exporters’ (I&E) window of the foreign exchange market. Overall, the Committee noted that the recovery of the economy was strengthening, in view of the return to growth of the Services Sector.
“As the fiscal sector continues to settle its outstanding liabilities, it reduces its domestic debt profile, thus increasing the liquidity of the banking system. However, the Monetary Policy Committee observed increasing monetization of oil proceeds as evident in the growing FAAC distribution, relative to the 2017 level of disbursements.
“The Committee urged the Government to initiate strong stabilization programmes and to freeze the growth in its aggregate expenditure and FAAC distributions in order to create savings; needed to stabilize the economy against future oil price related shocks”, Emefiele added.
He explained that as part of the apex bank’s monetary policy objectives, efforts would also be made by the fiscal and monetary authorities to encourage banks’ improved credit to investors.
On whether or not part of the foreign reserves would be spent on financing infrastructure such as refineries, Emefiele said that government would not directly withdraw money from the reserves to finance infrastructure but will support private investors in key infrastructure projects by providing them the needed foreign exchange on demand.
According to him, the committee also observed that given recent macroeconomic developments at the domestic and international environments, the nation’s economy holds the potential for sustainable growth in the months ahead.
The apex bank governor commended President Buhari and the National Assembly on the recent appointments of two Deputy Governors and MPC members for the bank, promising that the wealth of experience of the new appointees will be made to bear on monetary policies of the bank.
Commenting on the committee’s decisions, President of the Association of Bureaux Des Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, noted the retention of the MPR and others was a tactical response to the political and security challenges in the country.
He explained that the MPC members were cautious in their decisions in view of the fiscal uncertainties associated with the delay in passing the 2018 budget.
Gwadabe, however, pointed out that cutting the rates would have stimulated the economy and particularly boost the performance of the real sector.
On what he considered as crucial to ensuring stability of the foreign exchange market, the ABCON chief advised the CBN to address the problem of the prevailing exchange rates disparity in the market in order to sustain its recent gains.
