The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday left the Monetary Policy Rate (MPR) unchanged at 14 per cent.
The CBN Governor, Mr Godwin Emefiele who announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in Abuja explained that the members of the committee agreed to maintain the current monetary policy stance.
Apart from the MPR which was retained at 14 percent, the governor said the committee also voted to retain the Cash Reserves Ratio at 22.5 per cent.
Also retained are the Liquidity Ratio which was left at 30 percent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.
Defending the MPC’s position to retain the current level of the MPR, Emefiele, said: “In consideration of the challenges weighing down the domestic economy and the uncertainty in the global environment, the Committee decided by a unanimous vote of eight members in attendance to retain the MPR at 14 per cent, alongside all other parameters.
According to him, the Committee’s reluctance to alter the MPR in any fundamental manner is because of the current economic policy configuration and the need to allow the existing policies to fully achieve their intended goals and objectives.
He said the Committee noted that the cost of capital interest rate in the economy was high and that the trend was not helpful to growth.
Nevertheless, he said the MPC was concerned that loosening MPR would exacerbate inflationary impression, worsen the gains so far achieved in the exchange rate of the Naira and further increase the interest rate.
On the financial stability outlook, Emefiele said the committee noted that in spite of the banking sector resilience, the weak macroeconomic environment had continued to exert pressure on the banking system, but however urged the Deposit Money Banks to intensify its surveillance in order to address emerging vulnerabilities.
He urged the DMBs to step up credit drive in the private sector to support the economic recovery, a measure he claimed would send positive feedback to the financial system.
On his insistence of the economy moving on the growth trajectory and ending the recession, he said: “My view is that with all the positive signs we see: inflation trending downwards, Gross Domestic Product improving to the extent that the negative growth rate has decelerated quite significantly, the fact that we have seen forex go to real sector and production capacities and industry capacities are beginning to improve, we have seen positive signs in various sectors of the economy, I am very confident that by the end of third quarter that we would be out of this and I still hold to that position.”
Emefiele said the MPC, alerted on the risk of the possibility of the current increase in American shale oil production reducing the prices of crude oil and by implication, Nigeria’s revenue generation. As he put it: “We also alerted as risk the possibility of increased production of shale, that if that happens, it could upset our number,” but quickly added that the country must continue its drive towards the diversification of the economy.
“No doubt, the movement of US fuel normalization will lead to movement of funds from a margin back to the US and will no doubt have adverse effects on this economy. But I will say that I do not anticipate that those adverse consequences will be so intense in our environment because these investments have long left us,” Emefiele stated
