Post Views: 778 For the umpteenth time, members of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), rose at the end of their two-day...
For the umpteenth time, members of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), rose at the end of their two-day meeting on Tuesday, after voting six against two to retain the benchmark Monetary Policy Rate (MPR) at 14%.
In a communiqué at the end of the meeting, the committee also retained the Cash Reserve Ratio (the percentage of total deposit banks must warehouse at the CBN) to 22.5%; while retaining the Liquidity Ratio at 30%; as well as retaining the Asymmetric corridor at +200 and -500 basis points around the MPR.
In reaching these decisions, the committee however expressed concerns over the seemingly huge N2.51tr estimated fiscal deficit in the first half of 2017, the high government borrowing, made worse by the slow implementation of the 2017 budget. They called on the relevant authorities to ensure timely implementation, especially, of the capital portion in order to realize the objectives of the Economic Recovery and Growth Plan.
In the communiqué read by the committee chairman and CBN Governor, Godwin Emefiele, members of the MPC called for fiscal restraint to check the growing deficit, welcoming “the proposal by government to issue sovereign-backed promissory notes of about N3.4tr for the settlement of accumulated local debt and contractors arrears.
To check the adverse effect of such huge amount on macro-economic indices, the committee urged the CBN’s management “to monitor the release process of the promissory notes to avoid an excessive injection of liquidity into the system thereby offsetting the gains so far achieved in inflation and exchange rate stability.”
The MPC nonetheless applauded the Federal Government’s decision “to engage the services of asset-tracing experts to investigate the tax payment status of 150 firms and individuals in an effort to close some of the loopholes in tax collection, towards improving government revenue.
On the outlook for financial system stability, the Committee noted that, in spite of the resilience of the banking sector, the prolonged weak macroeconomic environment has continued to impact negatively on the sector’s stability. The MPC reiterated its call on the Bank to sustain its intensive surveillance of deposit money banks’ activities for the purpose of promptly identifying and addressing vulnerabilities. The Committee also called on the DMBs to support economic recovery and growth by extending reasonably priced credit to the private sector.
It was not all bad news however, the committee noted, acknowledging provisional data showing that Nigeria’s “external sector remained resilient in Q2 2017, as the overall Balance of Payments (BOP) position recorded a surplus of US$0.65 billion, equivalent to 0.8 per cent of GDP.”
That noted, members of the MPC expressed hope “that the implementation of the 2017 budget and the Economic Recovery & Growth Plan (ERGP) will further strengthen growth and stimulate employment.”