By Racheal Ishaya
Abuja, Jan. 22, 2019
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria, CBN, has retained the Monetary Policy Rate at 14 per cent to combat inflation due to foreseen increase in global and domestic risk to the country’s economy.
The Governor of CBN, Mr Godwin Emefiele, said this when he briefed newsmen in Abuja on Tuesday
on the outcome of the first Monetary Policy Committee meeting for the year.
Emefiele said all 11 members were present at the meeting and they all voted to retain the MPR, which was last changed in July 2016.
The Cash Reserves Ratio (CRR) also remained unchanged at 22.5 per cent, liquidity at 30 per cent and Asymmetric corridor at +200 and -500 basis points around the MPR.
Giving an insight to what informed the committee’s decisions, Emefiele said concerns were raised on the impact of the continued trade tension between the United States of America and China, as well as the Brexit situation in Europe.
On the domestic risk to growth, he mentioned the persistent security challenge in the North East, the herdsmen attack in other regions and perceived political risk due to the upcoming general elections.
The CBN boss said “in the light of the concerned risk confronting the economy, including the global and domestic inflationary measure which has intensified the risk of currency depreciation, the MPC is of the view that a loosening option is very remote.
“The MPC also felt that tightening will result in the loss of the gains so far achieved and may drive banks to reprise assets, thus increasing the cost of credit, as well as elevating credit risk in the economy.
“It will also worsen non-performing loans in banks.
“The committee also felt that tightening will dampen investment and hamper improvement in output growth, given the already fragile growth performance so far achieved.
“In the light of the factors, the committee decided to keep the policy parameters unchanged from their current levels by a vote of all 11 members.”
On the overall outlook and risks, the CBN governor said forecasts of key macroeconomic variables indicated a positive outlook for the economy in 2019.
He said that while the IMF had predicted that the country’s GDP would grow by two per cent, the World Bank, by 2.2 per cent, the CBN was of the view that the country would grow by at least 2.28 per cent.
Emefiele said “the committee noted the relative stability at both the bureau de change and investors and exporter’s window of the foreign exchange market supported by the bank’s exchange rate market polices.
“It observed with satisfaction, the contribution to stability in the market and the positive implications of the currency swap agreement with China and the inflow of the 2.8 billion dollars Euro Bond.
“The committee also noted the marginal increase in the foreign reserve from 42.45 billion dollars as at the end of December 2018 to 43.28 billion dollars as Jan. 21, 2019.
“The committee recommended that government should focus its expenditure on infrastructure investment and urged the Federal Government to sustain the pace in addressing the infrastructure deficit in the country.”
The governor also noted that the MPC noted that the immediate impact of the approach on GDP would be slow in coming but eventually expanded the economy’s productive base, reduce unemployment and increase aggregate demand in a more sustainable manner.
He added that the committee acknowledged the strategic role of the private sector in the economy’s growth and remained concerned over the slow growth in credit to the private sector in 2018.
He revealed that it was for this reason that the bank, in collaboration with the Nigerian Incentive Based Risk Sharing for Agric Lending planned to establish a National Micro Finance Bank with branches in all states and local government areas.
He said that the main objective of the bank would be to provide low interest rate lending to small-scale businesses in the country.
According to him, the committee also raised concern on the country’s debt level, warning that it can fast be approaching the pre-2005 Paris Club exit level.
In addition, he said, the committee advised the fiscal authorities to expedite action in broadening the country’s tax base to increase revenue.