Tuesday, May 23, 2017 5:27 pm
The Monetary Policy Committee has once again retained the Monetary Policy Rate at 14 per cent due to current uncertain economic conditions and high inflation.
The MPC has not made any major monetary policy change since July 2016.
The Central Bank Governor, Mr Godwin Emefiele, announced this while briefing journalist on the outcome of the Monetary Policy Committee meeting.
He said that eight out of 12 members were present at the meeting and they all voted unanimously to retain the MPR and all other monetary indices.
This means that the Cash Reserve Ratio still remains at 22.5 per cent and Liquidity Ratio, 30 per cent. Also, the Asymmetric corridor is at +200 and -500 basis points around the MPR.
“The committee contemplated the further tightening of monetary policy should the need arise.
“The MPC however noted the that further tightening will widen the income gap, depress aggregate consumption and adversely affect credit to the real sector of the economy.
“Nevertheless, against the backdrop of the rather unclear outlook around key economic activities especially food production especially, contraction of inflation, as well as relative stability in the foreign exchange rate, the MPC was reluctant to alter the current monetary policy configuration in any fundamental manner.
“This is intended to allow the existing policy to further achieve its intended goals and objective,” he said.
He said also that loosening of the MPR would further increase inflation pressure on the economy and reverse the gains achieved in strengthening the Naira.
Emefiele said that the committee also urged the fiscal authorities to focus on borrowing abroad in other to reduce the crowding out of private investors in the market.
“In spite of the banking sector resilience, the weak macroeconomic environment has continued to exert pressure on the privet sector.
“The MPC urged the CBN to intensify its surveillance in order to address emerging vulnerabilities.
“The committee also called on the money deposit banks to step up credit to the private sector to support economy recovery.”
Emefiele said that the continuous injection of foreign exchange into the market was already leading to a convergence of the parallel and interbank market.
“You will observe that about three months ago, the parallel market was above N500 to a dollar, but today, we have started to see a downward trend from that level to as low as N375 to a dollar.
“That for us is a significant achievement in the direction of convergence of rate. We would prefer a convergence that would significantly be going southwards than a convergence that would go northwest.
“So the fact that we are seeing a convergence in the southward directions, gives us hope that things are working in the right direction,” he said.
Emefiele also said that the MPC welcomed the passage of the 2017 budget and urged the fiscal authorities to ensure its judicious implementation especially the capital budget, in line with the economic recovery and growth plan.
He reiterated that the CBN would continue to intervene vigorously in the foreign exchange market, with the hope of strengthening the value of the Naira.
The CBN Governor, also said that based on data from the National Bureau of Statistics, he was certain that the Nigerian economy would come out of recession by third quarter of 2017.