Uche Usim, Abuja
The Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN), on Tuesday, warned Nigerians not to be carried away with unripe celebrations over the economy exiting recession because recent industry figures show it is still under threat of sliding back into crisis.
It said the economy slowed to 1.95 percent and 1.50 percent within the first and the second quarter 2018 respectively.
Also, seven out of the 10-member MPC voted for the retention of existing economic parameters with MPR being at 14%, Asymmetric Corridor at +200 and -500 basis points around the PMR and CRR at 22.5 percent.
Speaking after the 263rd MPC meeting held in Abuja Tuesday, the CBN Governor, Godwin Emefiele said the committee identified rising inflation and pressure on the external reserves created by the capital flow reversal as current challenges.
He noted that the inflationary measure has started rebuilding, and capital flow reversal has intensified as shown by the bearish trend in the equities market, even though the exchange rate remains very stable.
The MPC, he said, expressed concerns over the potential impact of liquidity injection from the election related spending and increase in FAAC distribution which was rising in tandem with increase in oil receipt.
“The MPC however, called on the government to fast track implementation of the 2018 budget to help jump start the process of sustainable economy recovery and to facilitate passage of the Petroleum Industry Bill in order to increase contribution to the overall GDP”, Emefiele said.
He noted that the outlook for the economy, however, remains positive as the country was projected to grow at 1.7 percent.
“The committee noted that the slowdown emanated from the oil sector, with strong linkages to employment and growth in the key sectors of the economy.
“In this regard, the committee urged government to take advantage of the current rising trend in the oil prices to rebuild fiscal buffers, strengthen government finances in the medium term and reverse the current trend of decline in output growth.
“The MPC also called on the fiscal authority to intensify the implementation of the Economic Recovery and Growth Plan (ERGP) to stimulate economic activities bridge the output gap and create employment.
“The committee noted that resumption to the food supply chain in major food producing states due to poor infrastructure, flooding and the ongoing security challenges. It noted the rise in food prices contributing to the uptake in the headline inflation”, the CBN Governor explained.
Emefiele said the committee was optimistic that as harvest progresses in the coming months, pressure on food prices would gradually continue to recede while growth enhancing measures would over the medium term, have some moderating impact on food prices over the medium term.
The Committee was concerned with the rising level of non-performing loans in the banking system, traced mainly to the oil sector and urged the banks to closely monitor and address the situation.
“It also expressed concerns over the weak intermediation by the Deposit Money Banks and its adverse impact on credit expansion and investment growth by the private sector”, he added.