….Worries over denial of overseas landing slots to local airlines
From Uche Usim, Abuja
In a move towards taming the raging inflation in Nigeria, currently pegged at 20.52%, the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, on Tuesday announced the hike in the Monetary Policy Rate (MPR) (lending rate) from 14% to 15.5%, showing an increase of 150 basis points.
This is the highest rate adopted by the CBN after it held the Minimum Rediscounted Rate (MRR) at 15 per cent on August 17, 2003.
He also warned Deposit Money Banks to meet their Cash Reserve Requirement by Thursday, September 29, or risk being shut out from the foreign exchange market by Friday.
Emefiele further called on the government and Nigerians generally to rise up and make strong cases for domestic airlines who have been continually denied landing slots in various countries, a development that fractures the Bilateral Air Service Agreement (BASA) signed between Nigeria and foreign nations.
Emefiele made the disclosures at a media briefing to mark the end of the 287th Monetary Policy Committee meeting held on Tuesday in Abuja.
On the potency of raised lending rates reining in inflation, Emefiele said: “Time tested monetary policy proves this. If you don’t raise rates because it will retard growth, not doing so will still retard growth as long as inflation keeps going up”.
On the CRR, being a percentage of a bank’s total deposit that must be maintained with the CBN, Emefiele said the CRR was previously held at 27.5 per cent, but was increased to a minimum of 32.5 per cent by the MPC.
He added that the apex bank will not relent in enforcing the CRR aimed at mopping up excess liquidity in the banking system.
He said, “What we have done at this meeting, we said we move CRR by five per cent to a minimum of 32.5 per cent. That we move MPR by 150bp that means over the last four months, we moved MPR by about 400 basis points. Let’s not forget that inflation rate in Nigeria at 20.52 per cent is still higher than our policy rate which means we are still lagging behind.
“We have increased the CRR and we expect that this decision at this meeting must achieve the effect that the MPC thinks it should achieve.
“What is the message? We expect that all the banks in Nigeria must fund their accounts by Thursday within 48 hours because we will debit them for CRR. We will take their CRR to a minimum of 32.5 per cent which means we are going to take liquidity out of their funds by Thursday.
“If any bank fails to meet up with these expectations, the decision of the MPC is that we may need to preclude those banks from foreign exchange market on Friday and onwards until they meet this target.
“We do not want to face Nigerians in the next few months and begin to take the blame.”
On CBN’s interest in local airlines having access to international destinations, Emefiele said it would reduce pressure on the foreign exchange, while boosting naira as spendings are in the local currency.
“We want to appeal to the home countries of these foreign airlines to give Nigerian airlines a chance to land their in airports line with the BASA agreements.
“You can’t have 21 landing slots but you’ve not given Nigerian carriers seven landing slots. Nigerians must stand and say this is not acceptable. Some even told our local airlines not to remind them of pending landing approvals as they will do it when they are ready to.
“When Nigerians are given slots, we can conserve foreign exchange and just use it for insurance, spares and aircraft procurement. I’ve to be selfish to defend my country. Nigerians must rise to demand the right thing for Nigerian airlines.
“We are determined to clear the backlog of what we owe foreign airlines. But the airlines say we should respect BASA. They can repatriate their proceeds but not through the CBN. No law saying it must be CBN. The banks may resort to CBN but the CBN is not under compulsion to provide dollars”, Emefiele explained.
He also revealed that the apex bank has injected N9 trillion naira into various intervention projects in the economy which has helped engender growth.