BY COBHAM NSA, ABUJA – The Central Bank of Nigeria (CBN) on Tuesday retained the Monetary Policy Rate (MPR) at 14 per cent with the Cash Reserve Ratio (CRR) pegged at 22.5 per cent.
Similarly, the apex bank said it will maintained Liquidity Ratio at 30.00 per cent while the Asymmetric Corridor is kept at 200 and -500 basis points around the MPR.
Rising from its Monetary Policy Committee (MPC) meeting in Abuja, the CBN Governor, Godwin Emefiele said the MPC’s decision, backed by an overwhelming majority of nine (9) out of 10 members, is against the backdrop disturbing currents in the domestic economy as well as uncertainties in the global space.
Mr Emefiele explained that in arriving at the decisions, the MPC
reassessed the implications for Nigeria the ongoing global
uncertainties as reflected in the telling protectionist stance of the
United States and some European countries.
He said other factors considered by the Committee include slow global economic recovery; the continuous strengthening US dollar; and the sustainment of the OPEC-Russian agreement to slice oil production beyond July 2017.
According to him, “The Committee also evaluated other challenges confronting the domestic economy and the opportunities for achieving price stability, conducive to growth in 2017. In particular, the Committee noted the persisting inflationary pressures; continuing output contraction; high unemployment rate; elevated demand pressure in the foreign exchange market; low credit to the real sector and
weakening financial system indicators, amongst others. Nonetheless, members welcomed the improved implementation of the foreign exchange policy that resulted in naira’s recent appreciation.”
Giving insights, the CBN helmsman said, “Similarly, the Committee expressed satisfaction on the release of the Economic Recovery and Growth Plan, and urged its speedy implementation with clear timelines and deliverables”, adding that, “On the strength of these developments, the Committee felt inclined to maintain a hold on all policy parameters.”
The MPC stated that arguments supporting tightening the policy were quite positive and convincing, noting that these include among others, the real policy rate which remains negative, elevated demand pressure in the foreign exchange market and upper reference band for inflation that remains substantially breached.
For the Committee, “The reality of sustained pressures on prices
(consumer prices and the naira exchange rate) cannot be ignored, given the Bank’s primary mandate of price stability. It noted that the moderation in inflation in February was due to base effect as other parameters, particularly; month-on-month CPI continued to rise. However, tightening at this time would portray the Bank as being insensitive to growth.”
Looking at all the variables, the MPC said it is important to create binding restrictions on growth in narrow money and structural liquidity while also acknowledging that macroeconomic stability is not only vital in achieving price stability but also conducive to growth in the polity.
