….Also all other ParametersAgain for the past five months the Monetary Policy Committee(MPC) of the Central Bank of Nigeria has left the Monetary Policy Rate(MPR) unchanged at 14 per cent.
The Governor of the Central Bank of Nigeria(CBN), Mr. Godwin Emefiele, who announced the decision of the committee at the end of their meeting in Abuja, said nine out of the 10 members that attended the meeting agreed to maintain the current monetary policy rates, just one member voted to raise the MPR. Aside the MPR which was retained at 14 per cent, Mr. Emefiele also announced that the committee voted to retain the Cash Reserves Ratio(CRR) at 22.5 per cent.
Others that were retained are the Liquidity Ratio, which was left at 30 per cent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.
Mr Emefiele noted that the Committee re-evaluated the implications for Nigeria of the continuing global uncertainties as reflected in the unfolding protectionist posture of the United States and some European countries; sustenance of the OPEC-Russian agreement to cut oil production beyond July 2017; sluggish global recovery and the strengthening U.S. dollar.
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. 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. On the strength of these developments, the Committee felt inclined to maintain a hold on all policy parameters.
Nevertheless, the Committee noted the arguments for tightening policy which remained strong and persuasive. These include: the real policy rate which remains negative, upper reference band for inflation remains substantially breached and elevated demand pressure in the foreign exchange market.
He also said 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 noting 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. Also, the deposit money banks may easily reprice their assets which would undermine financial stability”, he said.
Besides, the Committee noted the need to create binding restrictions on growth in narrow money and structural liquidity and the imperative of macroeconomic stability to achieving price stability conducive to growth.
