By Gift Olivia Samuel, The Sight News
ABUJA-The Monetary Policy Committee (MPC) of the Central Bank of Nigeria(CBN), has again retained the Monetary Policy Rate(MPR) at 14 per cent, alongside other policy parameters.
The MPC which had held the MPR at 14 per cent since July 2016, pointed out, that holding policy at the current stance, would support growth and further moderate inflation.
The CBN Governor, Mr Godwin Emefiele, who announced the decision of the committee at the end of a two-day meeting in Abuja, stated that the argument in favour of maintaining the current policy stance is to monitor the magnitude of the liquidity impact of the fiscal injections and election-related expenditure ahead of the 2019 general elections.
Emefiele explained, that the Committee was of the view that, raising interest rate at this time, would weaken consumption and raise the cost of borrowing to investors in the domestic economy, adding that the policy would trigger the re-pricing of financial assets by Deposit Money Banks(DMBs) and further constrict credit to the real sector, which will in turn promote non-inclusive growth.
In considering the option of loosening, he stated that the Committee assessed the potential effects of stimulating aggregate demand through lower cost of capital, noting that this could stimulate consumption and aggregate demand.
According to him, “The Committee, however, considered its potential relevance, taking into account the expected liquidity injections from the 2018 budget, increased FAAC disbursements and election related spending ahead of the 2019 general elections. If these crystalize, it would exacerbate inflationary and exchange rate pressures as well as return the real interest rate into negative trajectory.”
He announced that the MPC consequently, voted to retain the Monetary Policy Rate, MPR at 14.0 per cent; Cash Reserve Requirement, 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.
The apex Bank Governor remarked, that the CBN will continue to sustain the growth recorded in the foreign exchange reserve position, which stood at close to $48 billion.
Furthermore, he said that in view of increasing prices of crude, the Committee also called on the Federal Government to continue to build fiscal buffers against possible oil price shocks in the future, noting, that the rise in the monthly distribution of revenues at the FAAC portend the danger of the absence of reserve buffers to absorb shocks in the future.
He added also that the MPC called on the government to continue to prioritise payment of debts owed to contractors, and to apply caution in injecting funds into the economy, to avoid escalating inflation, which has been on a downward trend.
While fielding questions from Journalists, Emefiele reassured Nigerians that the $2.5 billion bilateral currency swap agreement with the People’s Bank of China, will ease pressure in the Nigerian foreign exchange market.
Accordingly, the MPC called for speedy implementation of the framework of the currency swap and urged the Bank to carry out sensitization programme for the public.