By Lucy Nwachukwu
The Monetary Policy Committee (MPC) has again retained the Monetary Policy Rate (MPR) at 14 per cent due to uncertainties in the global market.
Mr Godwin Emefiele, Governor, Central Bank of Nigeria (CBN), said this while briefing newsmen on the outcome of the 257th meeting of the MPC on Tuesday in Abuja.
“ MPC decided to retain MPR at 14 per cent, retain CRR at 22.5 per cent, retain the liquidity ratio at 30per cent, retain assymetric corridor at +200 and -500 bases point around the monetary policy rate.’’
He said the MPR was not eased at this time because it would signal the committees’ sensitivity to growth and employment concern by encouraging the flow of credit to the real economy.
“The MPC noted the liquidity suffering in the banking system and continuous weakness in financial intermediation.
“It agreed on the need to support growth without jeopardising price stability or offsetting other recovering macroeconomic indicators, particularly the relative stability in the Foreign Exchange (Forex) market.
“The MPC thinks that easing at this point will signal the committee’s sensitivity to growth and employment concern by encouraging the flow of credit to the real economy.
“It observed that easing at this time will reduce the cost of debt service which is actually crowding out government expenditure.
“Also, the risk to easing will further pull the real interest rate down into negative territory,’’ he said.
Emefiele stated that the argument for holding was to ensure workability of the past policies in the economy.
He said the MPC factored that the high banking system liquidity level, the need to continue to attract foreign investment inflow to support the forex market and economic activity would cause a jump in the system liquidity.
According to him, the expansive outlook for fiscal policy in the rest of the year and the prospective election related spending will also cause a jump in the system liquidity among other things.
He said the committee expressed concern over the increasing fiscal deficit estimated at N2.51 trillion in the first half of 2017 and the crowding out effect of high government borrowing.
The CBN governor urged that fiscal restraint measures be used to check the growing deficit in the economy.
He expressed the committee’s pleasure at the proposal by government to issue sovereign bad promissory note of about N3.4 trillion for the settlement of accumulated local debts and contractor arrears
Emefiele said the committee had advised management of the bank to monitor the release process of the promissory note.
This, he said would help avoid an excessive injection of liquidity into the system, thereby, offsetting the gains so far achieved in inflation and exchange rate stability.
Emefiele noted that in spite of the resilience of the banking sector, the prolonged weak macroeconomic environment had continued to impact negatively on stability of the sector.
He reiterated MPC’s call on the bank to sustain its intensive surveillance of the Deposit Money Bank (DMB) activities for the purpose of promptly identifying and addressing vulnerabilities.
The CBN boss also called on DMB to support economic recovery growth by extending reasonably price credit to the private sector. (NAN)
