..Insists Naira can’t float
By Uche Usim
The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), Tuesday, voted to hold benchmark interest rate at 14 per cent, while Cash Reserve Ratio (CRR) and liquidity ratio were left at 22.5 per cent and 30 per cent respectively.
CBN Governor, Godwin Emefiele, who read the communique at the end of the meeting, said the 10 members present at the meeting decided unanimously to keep the asymmetric corridor at +200 and +500 basis points.
Recall that the apex bank, which adopted the current rate since July 2016, has maintained all rates through 2016 and into 2017.
Lukman Otunuga, market analyst at FXTM, said “the central bank has decided to maintain a cautious approach amid the ongoing instability.
“The fact that the nation is currently entangled in a fierce battle with cost-push inflation has created unease with concerns already heightened over the CBN running low on ammunition. It must be understood that the cause behind the incessant rise in consumer prices is the disparity between the official and black market exchange.
“Many producers in Nigeria do not have the ability to purchase the naira on the official exchange and are forced to use the black market, which inevitably will make the products more expensive.
“The additional costs are reflected in prices, which punish consumers and spark higher inflation levels. While most have suggested that the black market should not exist, it is the simple fundamentals of supply and demand that fuel this exchange.
“There is a possibility of the CBN accepting that the black market represents the true value of the naira, which should encourage further devaluations on the official exchange this year in a bid to reclaim stability.
“Although major financial institutions such as the IMF and World Bank have predicted that Nigeria may exit recession this year, the nation still remains exposed to both external and internal risks, which should keep the CBN on high alert.”
Commenting on the communiqué of the 111th MPC meeting in Abuja, Emefiele said the improved external reserves does not call for wasteful spending as Nigeria needs all financial strength it can muster to get of out recession.
The apex bank boss said the country does not run forex float regime, but a “a managed float so that rate doesn’t go beyond our expectation. We should not be reckless even with improved foreign reserve,” he added.
Emefiele also disclosed that the CBN had begun the disbursement of N50 billion set aside for textile industry.
“We’ve started disbursing it. We want to see that sector grows and create jobs. We’re looking at sectors that create jobs. That is what the CBN Anchor Borrowers’ Scheme is also achieving,” he noted.
On what the apex bank is doing to close the gap in forex value between inter-bank and parallel market, Emefiele said the CBN would continue to make forex available to the priority sectors.
When we do that, the urge to go illegal markets will reduce. We are focusing only on vital areas”, he stated.