MPC: Emefiele Explains MPR’s Retention,


BY COBHAM NSA, ABUJA – As predicted by analysts, the Monetary Policy Committee (MPC) on Tuesday retained the Monetary Policy Rate (MPR) at 14 per cent, citing global market uncertainties to defend its decision.

According to the Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele, lowering the MPR will jerk actual lending rates to adverse territory resulting in an unhealthy outcome.

In a media briefing on the MPC meeting’s outcome in Abuja, Mr Emefiele said that any decrease in MPR would be an encumbrance for investments in the country

He also stated that disincentives to investment would hurt the stability that had been achieved in the Foreign Exchange (Forex) market and there was need to ensure this would not happen.

The Governor stated that to ensure stability in the system, “MPC decided to retain MPR at 14 per cent, retain CRR at 22.5 per cent, retain the liquidity ratio at 30per cent, retain assymetric corridor at +200 and -500 bases point around the monetary policy rate.’’

He said in recognition of liquidity suffering in the banking system and continuous weakness in financial inter-mediation, the MPC “agreed on the need to support growth without jeopardizing price stability or offsetting other recovering macroeconomic indicators, particularly the relative stability in the Foreign Exchange (Forex) market.”

He said the Committee believes that easing the rate at this time will lessen the cost of debt service that continues to crowd out government expenditure, adding “the risk to easing will further pull the real interest rate down into negative territory.”

“That is the rationale and the actions of the MPC will be reflected in whatever direction we think is good for Nigerians. As Nigerians, we should understand that there is a need for a low interest rate because we know that it will make it easy for people who want to borrow money at a low rate”, he said

The Governor said every measure taken by the apex bank is meant to ensure workability of past policies in the economy, stressing that as a regulator, with the various data challenging it, CBN has a key role to play in stabilizing the economy.

He maintained that, “doing our work means we must continue to do what we have done to continue to achieve the sliding trend in inflation and stabilise the foreign exchange market.

On the high banking system liquidity level, the Governor said the need to continuously entice foreign investment inflow to back the forex market and economic activity was capable of upping the system liquidity.

According to him, the expansive outlook for fiscal policy in the rest of the year and the prospective election related spending will also cause a jump in the system liquidity among other things.

He said the committee expressed concern over the increasing fiscal deficit estimated at N2.51 trillion in the first half of 2017 and the crowding out effect of high government borrowing.

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