As Emefiele Names Standard Chartered Bank, Stanbic As Settlement Banks for Swap Deal
By Gift Samuel, The Sight News
ABUJA: The Central Bank of Nigeria’s Monetary Policy Committee (MPC), has decided by a vote of eight (8) members, to retain the Monetary Policy Rate (MPR) at 14.0 per cent alongside all other policy parameters.
One member voted to increase the MPR by 50 basis points but was outnumbered and consequently, the MPC voted to retain the MPR at 14.0 per cent; CRR at 22.5 per cent; Liquidity Ratio at 30.0 per cent; and Asymmetric corridor at +200 and -500 basis points around the MPR.
Speaking to Newsmen in Abuja on Tuesday after the second MPC meeting in 2018, the Governor, Central Bank of Nigeria,(CBN), Mr. Godwin Emefiele, noted that while arguing for a hold, the Committee observed that the downside risk to growth and upside risk to inflation appears balanced as growth is improving while inflation is moderating.
He also noted that maintaining the current policy stance would sustain gradual improvements in both indices.
“In summary, the predominant argument for a hold at this time is to await more clarity on the evolution of key indicators i.e. the passage and implementation of the budget, economic activities, and traction in fiscal policy in 2018” he explained.
The Governor further said that the Committee was convinced that the economy needed a new impetus of increased lending by the banking system and would work with the Bank to adopt innovative ways to encourage the deposit money banks (DMBs) to adopt innovative ways to accelerate credit growth, including a reduction in the policy rate when conditions for such a decision arises.
According to him, “The MPC noted that at single digit inflation and higher reserve levels, the risks associated with a policy rate reduction under conditions of wavering foreign capital inflows and an unstable oil market, including other severe uncertainties, could be better managed to deliver macroeconomic stability in Nigeria”.
On the choice to loosen, he said that the Monetary Policy Committee,evaluated the potential impact of stimulating aggregate demand through lower cost of credit.
He added also that the Committee further noted that loosening could worsen the current account balance through increase in importation, margin lending, lowering of risk evaluation in accessing loans which will drive up loans and likely increase in NPLs with potential negative consequence on the stability of the banking industry and the cost of liquidity management would also rise considerably.
Speaking on the choice to tighten, he stated that “The Committee considered the forecast of high liquidity injection in the second half of 2018, upward pressure on prices, driven largely by substantial expansionary fiscal policy, which will arise from the late passage of the 2018 appropriation bill, outstanding balance from the 2017 budget and the pre-election expenditures. Thus, tightening would ensure the mop-up of excess liquidity”.
The Committee took note of the improved performance of deposit money banks and observed that the relatively high levels of non-performing loans in the industry was moderating and urged Government to promptly settle outstanding contractor arrears as earlier promised.
While fielding questions from Journalists on the currency swap deal between Nigeria and China, Emefiele explained that the deal will be positive for Nigeria and Nigerians, noting that it is the expectation of the CBN and the Bank will ensure that it is achieved.
He explained further that, “This was a negotiation that was painstakingly done and I am optimistic that Nigeria will reap the positive impact from this and we do expect that by the time the framework is released, that Nigeria will end up being the trade hub for the west African sub regions. Whatever conclusion we get from this can never be negative to Nigeria.
“There are a lot of things for Nigeria to benefit from this arrangement and then particularly not just in Nigeria but also in the West African Sub Region” he said.
The Governor announced that the framework will be released by next week, with Standard Chartered Bank and Stanbic Bank as the settlement banks with affiliations to the Investment and Commercial Bank of China(ICBC).
