WorldStage Newsonline-- The Central Bank of Nigeria’s Monetary Policy Committee today in Abuja voted nine to one to hold the Monetary Policy Rate (MPR) at 12 per cent. In a communiqué red at the end of the meeting by the CBN Governor, Mallam Sanusi Lamido Sanusi, only 0ne member out of 10 that attended voted for a 50 basis points reduction. Other decisions of the committee include by a vote of 9 to 1 to maintain the symmetric corridor around the MPR at /-2 per cent. One member voted for an asymmetric corridor; Unanimity to retain the Cash reserve Ratio (CRR) at 12 per cent; and 9 to 1 to introduce a 50 per cent CRR on public sector deposits. This will be applied on Federal, State and Local Government deposits and all MDAs. For other deposits CRR will remain at 12 per cent. To arrive at the dicisions, Sanusi said the committee considered and was satisfied with the prevailing macroeconomic stability achieved during the period, including the single digit inflation, stable banking system, exchange rate stability, favourable output growth, capital market recovery and growth in external reserves, thus sustaining internal balance and external viability. “The Committee also noted the recent volatility in the foreign exchange market and also recognized that the commitment of the Bank to defend the currency in the face of capital flow reversal and significant revenue attrition has stemmed the depreciation of the naira. Consequently, the Bank has been able to sustain the objectives of financial and price stability,” he said. “The Committee observed the build-up in excess liquidity in the banking system, and expressed concern over the rising cost of liquidity management as well as the sluggish growth in private sector credit, which was traced to DMB’s appetite for government securities. This situation is made more serious by the perverse incentive structure under which banks source huge amounts of public sector deposits and lend same to the Government (through securities) and the CBN (via OMO bills) at high rates of interest. “The Committee expressed strong concerns about the risks posed to government revenues from oil theft, less than expected production, new discoveries of shale oil, the fast increasing number of African oil exporters, the dwindling market for Nigerian crude as well as the inevitability of a fall in global oil prices as well as capital flow reversal, which may impact the current global (dollar) carry trade, for which Nigeria has been a major beneficiary. “The Committee commended the Federal Government on its sustained efforts towards fiscal consolidation in 2012 and stressed the need to reverse the loose fiscal stance of 2013. The Committee articulated the monetary policy risks of dwindling fiscal revenues to include: the crowding out effect of government borrowing, depletion of excess crude savings and pressure on the exchange rate. Available data indicates that capital expenditure is the first casualty of dwindling government revenues as available resources are channeled into funding non-discretionary recurrent expenditure. “The Committee considered the inflationary outlook for the rest of the year as benign. However, principal risks remain largely due to the loose fiscal stance and rising deficit, excess liquidity in the banking system and risks to the exchange rate due to a combination of revenue shocks and external developments.”
Posted on: Mon, 05 Aug 2013 11:10:27 +0000
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