In its last meeting for 2019, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has again retained the Monetary Policy Rate at 13.5 percent, alongside all other policy parameters.
The Sight News gathered that MPC voted to; Retain the MPR at 13.5 per cent; the asymmetric corridor at +200/-500 basis points around the MPR; the CRR at 22.5 per cent; and the Liquidity Ratio at 30 per cent.
Speaking to Journalists after the Meeting on Tuesday, the CBN Governor, Godwin Emefiele, said the decision to hold was unanimous, following the improvements in the macroeconomic indicators such as the Gross Domestic Product, Non Performing Loans, Capital Adequacy Ratio, and the Loan- to-Deposit-Ratio, which suggested that the current monetary policy stance is yielding results.
He also said that the MPC was of the view that sustaining the MPR at its current level is crucial for a better understanding of the unfolding impetus of growth before deciding on any probable variations.
According to him, “In its consideration to hold, the MPC noted with pleasure, the positive outcome of actions already taken by the Bank. These actions include: current policy on loan-to-deposit ratio, which has resulted in loans and advances rising by over N1.1trillion between June to October 2019.
“It further noted that these actions have assisted in boosting credit to the agricultural and manufacturing sectors, hence, the positive outcome on the GDP”.
He added that the MPC is hopeful that the Loan- to-Deposit-Ratio (LDR) initiative must be sustained as interest rates being paid by borrowers have so far dropped by up to 400 basis points between June and October 2019, adding that these have happened with corresponding decline in NPLs to 6.5 per cent at the end of October 2019.
Meanwhile, the Committee noted that the uptick in headline inflation (year-on-year) from 11.24 in September to 11.61 per cent in October 2019, was anticipated as part of the seasonal end-of-the year uptick in prices; but was further accentuated by the border closure.
Although it noted that the price increase was not unexpected, the Committee expressed belief that the medium to long-term benefits far outweigh the short-term cost.
“On the impact of the recent closure of Nigerian land borders on domestic food prices, the Committee noted that any upward price movement arising from the closure was reactionary and therefore temporary.
“The Nigerian land borders were closed to address the incidence of increased cross-border banditry, smuggling and dumping, insurgency and the illegal trade practices of neighbouring countries whose economies had become dependent on Nigeria through smuggling through the borders”, he remarked.
The Committee expressed support for the temporal closure of Nigeria’s land borders, noting that securing the country’s land borders should be further enhanced.
Consequently,the MPC noted the need to drive down food prices through increased support for local production of staple foods, including rice, fish, poultry, palm oil, tomatoes etc.,and also urged the Government to follow through with a sustainable policy on backward integration in the milk industry and other priority sectors of the economy.
On the fiscal sector, the Committee identified the need for institutional reforms through policies that would automate day-to-day processes of key revenue generating and security agencies such as the Nigerian Customs, so as to provide additional advantage of stemming smuggling, kidnapping and the migration of terrorists into the country.