BY COBHAM NSA, ABUJA – The Central Bank of Nigeria (CBN) on Monday kept the Monetary Policy Rate (MPR) at 14 per cent with all other parameters equally retaining their existing positions.
Proving bookmakers right again, the apex bank said the decision to retain all the rates stems from the inherent gains following Monetary Policy Committee (MPC)’s earlier moves that ensured stability in the foreign exchange market as well as moderate reduction in inflation rate.
Rising from its 2-day MPC meeting in Abuja, CBN Governor, Mr. Godwin Emefiele, said in the face of mounting pressure “to hold, to tighten or ease policy stance”, the Committee noted that while “tightening would strengthen the impact of monetary policy on inflation, with complementary effects on capital flows and exchange rate stability, it would nevertheless also potentially dampen paucity output for growth and financial stability as this would constitute a risk to the productive sector of the economy.”
He stated that though loosing the rates would engender growth by stimulating domestic aggregate demand, through reduced borrowing cost, “it could nevertheless aggravate upward trend in consumer prices and generate exchange rate pressures.”
“Loosening could also worsen the current account balance of the country through increased importation”, Emefiele said.
Giving insights on arguments to support holding its present position, he said the MPC is convinced that key variables are evolving in line with current economic policy structure and should be encouraged to fully manifest, just as members noted that the developments in output and especially inflation should be closely monitored to gain clarity on medium term optimal path of the monetary policy.
The Governor also spoke on the oversubscription of the $3 billion Eurobond introduced to the international capital market last week by about $11 billion, describing it as a positive development and indicative of global investors’ growing confidence in the Nigerian economy.
On the country’s external reserves that have risen above $34 billion, the apex bank boss said investors and exporters window of the foreign exchange market has been quite encouraging, raking in over $18.7 billion inflow since April this year, adding that the development indicate investors and exporters’ growing confidence in Nigeria’s foreign exchange policy.
The CBN boss, who expressed optimism that there would be better performance, going forward, said the banking system remains stable in its overall outlook with the banks’ balance sheets maintaing strong showing despite the Non-Performing Loans (NPLs) challenges regarding some sectors.
He also said early warning systems are being put in place by the monetary authorities to identify vulnerability and proactively manage any emerging risks in the banking system, stressing that the authorities are also gearing up for a tenacious implementation of the 2017 budget and an early passage of the 2018 budget as tools for positive impact on the overall economic performance.
Mr Emefiele said though the economic recovery process still remains weak, focused policy measures and an aggressive policy implementation wnould surely turn things around to give Nigerians and potential investors hope for a better future.
