SAN FRANCISCO, May 23, (THEWILL) – The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has again retained interest rate at 14 percent, the country’s highest in 10 years.
Cash reserve ratio (CRR) and liquidity ratio were maintained at 22.5 percent and 30 percent respectively.
CBN Governor Godwin Emefiele told reporters at the end of the MPC meeting in Abuja that members of the committee considered risks like late approval of 2018 budget, farmers/herdsmen clashes, salary arrears, growing sovereign debt.
Emefiele said eight members of the committee voted in favour of maintaining rates, while one member voted in favour of tightening by 50 basis points.
He added that the CBN has vowed to monitor and control spending in the coming months to save the economy from the adverse consequences of expansionary fiscal measures due to election spending looming and the late passage of the 2018 budget.
“The risks to the outlook include the huge liquidity injection that is expected to arise from the implementation of the proposed N9.12 trillion 2018 federal government budget, expenditure towards the 2019 elections, monthly FAAC injection, approval and implementation of the proposed new national minimum wage and the possibility of a supplementary budget to finance this,” he said.
“These could impact aggregate demand and put pressure on domestic prices in the remaining months of 2018 and dampen the gains already made by the bank in stabilising prices.
“Despite the drop in inflation, the current inflation rate is still above the targeted single digit. The objective of the policy stance, therefore, would be to accelerate the reduction of inflation to single digit to promote economic stability.
“There is need to see how all the components of the gross domestic product would evolve in the second quarter of 2018 in order to gain greater clarity on the direction of monetary policy.
“The predominant argument for a hold at this time is to await more clarity on the evolution of key indicators that is the passing of the budget and implementation, economic activity and traction in fiscal policy in 2018.
“The committee was convinced that the economy needed a new impetus for increased lending by the banking system and would work with the bank to encourage deposit money banks to adopt innovative ways to accelerate credit growth including a reduction in the policy rates when conditions for such a decision arise.
“We will be in control and monitor these activities and ensure that as these activities begin to unfold we, as monetary policy authority, will take action that will make sure that the adverse consequences that will arise from these expansionary activities will not impede our activities of bringing inflation down and achieve a stable exchange rate.”
On the Nigeria/China currency swap, the CBN Governor said the details of the framework would be released next week.
