…Vows to sustain forex intervention
From Uche Usim, Abuja
The Central Bank of Nigeria’s (CBN)’s Monetary Policy Committee (MPC), yesterday, retained the Monetary Policy Rate (MPR) at 14 per cent, the Cash Reserve Ratio (CRR) at 22.5 per cent and the Liquidity Ratio at 30 per cent.
The MPC also retained the asymmetric corridor at +200 and -500 basis points around the MPR.
Briefing journalists on the outcome of the 113th MPC meeting in Abuja yesterday, the CBN Governor, Godwin Emefiele, vowed to sustain the foreign currency intervention programme to achieve rate convergence.
He added that the MPC met against the backdrop of slowly improving global growth prospects even as international cooperation continues to be threatened by anti-globalisation sentiments in major advanced economies.
Emefiele said the Nigerian economy has shown greater resilience in the intervening period since the last meeting of the committee, anchored on more focused macroeconomic policies and improvements in oil prices.
The CBN Governor said the economy contracted marginally by 0.52 per cent in the first quarter of 2017, describing it as a much more positive development since the first quarter of 2016.
“The data from the National Bureau of Statistics (NBS) also shows that about 18 economic activities recorded positive growth in first quarter of 2017, indicating that the economy is firmly on the path of recovery. Available data and various forecasts of key economic variables as well as assessment of government initiatives, including the recently released Federal Government Economic Recovery and Growth Plan (ERGP), all point to prospects of recovery in 2017. “While the general economic outlook seems cautiously optimistic for the remainder of fiscal 2017, emerging indicators suggest that economic policy must remain circumspect,” he said.
Emefiele also said the MPC noted the recent gains in the naira exchange rate, brought about by CBN’s interventions in the foreign exchange market and the resulting downward price adjustments on imported items and their derivatives should be sustained.
“Against this background, the committee emphasised the need to sustain and deepen the bank’s foreign exchange management policies and measures in order to reap the benefits of the pass-through to consumer prices. The MPC recognised the continued influence of structural factors such as high energy and transportation costs, production bottlenecks on prices and hoped that the ongoing reforms by the government would address some of these constraints.
Money market interest rates moved in tandem with the level of liquidity in the banking system. Rates were relatively stable during the review period. The interbank call rate opened at 11.40 per cent on March 22, 2017 and closed at 38.94 per cent on May 18. The movement in net liquidity position was influenced by sales at the Open Market Operations, foreign exchange interventions, the payment of statutory revenues to states and local governments as well as maturing CBN bills,” he added.
The CBN Governor hinted that the MPC was particularly pleased with the gradual retreat in inflation, the relative stability in the naira exchange rate across all segments of the foreign exchange market and the improved prospects of foreign investment inflow.
“The committee also welcomes the passage of the 2017 Budget and called on the relevant authorities to ensure its judicious implementation, especially the capital budget in line with the ERGP. It, however, noted the associated risks to banking system liquidity of the envisaged fiscal injections during the remainder of the year. Against this risk, the committee contemplated the prospects of further tightening of monetary policy should the need arise. The MPC, however, noted that further tightening would widen the income gap, depress aggregate consumption and adversely affect credit to the real sector of the economy,” he added.
