The Central Bank of Nigeria (CBN) is retaining the current level of Monetary Policy Rate (MPR), its base interest rate at 14 per cent.
After the Monetary Policy Committee (MPC) meeting in Abuja, CBN Governor Godwin Emiefele said, the recession corridor would come to an end by the third quarter because of the positive financial and economic indicators, which would endure.
Emefiele said the challenges weighing down the domestic economy and the uncertainty in the global environment, necessitated the Committee’s unanimous vote to retain the MPR at 14 per cent, alongside all other parameters.
The MPC decided to retain “MPR at 14 per cent. Retain Cash Reserve Ratio (CRR) at 22.5 per cent. Retain liquidity ratio at 30 per cent and Retain the asymmetric corridor at plus 200 and minus 500 basis points around the MPR.”
According to him,
- The Committee’s reluctance to alter the MPR in any fundamental manner is because of the current economic policy configuration and the need to allow the existing policies to fully achieve their intended goals and objectives.
- The Committee noted that the cost of capital interest rate in the economy was high and that the trend was not helpful to growth.
- Nevertheless, the MPC was concerned that loosening MPR would exacerbate inflationary impression, worsen the gains so far achieved in the exchange rate of the Naira and further increase the interest rate.
- The committee noted that in spite of the banking sector resilience, the weak macroeconomic environment had continued to exert pressure on the banking system, but however urged the Deposit Money Banks to intensify its surveillance in order to address emerging vulnerabilities.
Enefiele urged the DMBs to step up credit drive in the private sector to support the economic recovery, a measure he claimed would send positive feedback to the financial system.
He was also of thy view that with all the positive signs: inflation trending downwards, Gross Domestic Product improving to the extent that the negative growth rate has decelerated quite significantly, forex going to real sector and production capacities and industry capacities beginning to improve, by the end of the third quarter, Nigeria would be out of recession.
Emefiele said the MPC, alerted on the risk of the possibility of the current increase in American shale oil production reducing the prices of crude oil and by implication,Nigeria’s revenue generation. As he put it: “We also alerted as risk the possibility of increased production of shale, that if that happens, it could upset our number,” but quickly added that the country must continue its drive towards the diversification of the economy.
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