…Decision not in economy’s interest –Rewane
Uche Usim, Abuja; Adewale Sanyaolu
True to experts’ predictions, the Monetary Policy Committee (MPC) members at the Central Bank of Nigeria (CBN), yesterday voted for the retention of existing economic parameters with Monetary Policy Rate (MPR) pegged at 14 per cent, Cash Reserves Ratio (CRR) at 22.5 per cent, and Liquidity Ratio at 30 per cent across Asymmetric Corridor at +200 and -500 points around the MPR.
Arising from its first meeting in the year, the CBN Governor, Mr. Godwin Emefiele, said nine members were in attendance, stressing that the decision to retain all existing rates was to further cement the stability achieved in the economy.
He revealed that the nation’s foreign reserves have hit $46.69 billion, adding that plans were afoot to quickly offset government’s indebtedness to contractors, currently standing at N2.7 trillion.
“The size of contractors’ debt is N2.7 trillion and because these debts are unpaid to the contractors, the contractors themselves are unable to service or pay back their loans at the banks and that is why we seized the opportunity of this communique to talk about it so that these debts can be paid. The central bank itself stands ready to accord some form of liquidity status to some of these debts and through that mechanism we believe the NPL (Non-Performing Loans) will recede and then the banks can now continue to play their role which is to catalyse growth and support credit delivery to the Nigerian economy,” Emefiele explained.
He said the committee noted with satisfaction, the gradual return to macroeconomic stability as reflected in the third consecutive quarterly growth in real GDP in the fourth quarter of 2017. It also noted the continued moderation in all measures of inflation as well as sustained stability in the naira exchange rate and urged the bank to sustain the stability to avoid a mission drift.
On the views that Nigeria’s foreign reserves cannot buoy major projects due to heavy debt for credit raised through eurobond, the CBN Governor said the total amount that has been raised through eurobonds since last year is less than $6.5 billion.
“Even if we deduct $6.5 billion from $46.69 billion it’s still about $40 billion, which we have and that is an ample size. But again, it’s important for you to know that once the eurobond proceeds got into the central bank reserves and it’s converted from dollar to naira, it’s easy to become money belonging to the fiscal. It becomes part of CBN reserves, which can be used when we deem it necessary to do so.
In his reaction, the Chief Executive Officer of Financial Derivatives Limited, Mr. Bismark Rewane, slammed the CBN for retaining all rates 21 months after even when the economy is in stable condition.
Rewane, said the inability of the CBN to reduce interest rates has shown that the CBN was not ready to take risk, saying that, that does not augur well for the economy.
‘‘For how long will the CBN continue to confine itself to the narrow definition of price stability as being the broad objective of central banking?
Again, if you look at their decision from a broad macroeconomic objective of enduring growth, creating employment and improving the welfare of the people, then this is a wrong decision to make,’’
There is never going to be an opportune time to do this. There is always a risk. Every decision enjoys a risk element. But if you are looking for a riskless decision, then you are not in the business of making any decision at all.