By Joseph INOKOTONG
The Central Bank of Nigeria (CBN), after a meeting of its Monetary Policy Committee (MPC) in Abuja unanimously decided to retain the MPR at 14.0 per cent alongside all other policy parameters.
The apex bank in arriving at this, said it factored in the slowly improving global growth prospects even as international cooperation continues to be threatened by anti-globalization sentiments in major advanced economies.
A communiqué issued at the end of the MPC meeting stated that “In summary, the MPC decided to: Retain the MPR at 14 per cent; retain the CRR at 22.5 per cent; retain the Liquidity Ratio at 30.00 per cent; and retain the Asymmetric corridor at +200 and -500 basis points around the MPR”
It explained that “on the domestic front, the economy has shown greater resilience in the intervening period since the last meeting of the Committee, anchored on more focused macroeconomic policies and improvements in oil prices.”
It however noted that while the general economic outlook seems cautiously optimistic for the remainder of fiscal 2017, emerging indicators suggest that economic policy must remain circumspect.
Notwithstanding the improved outlook for the economy, the Committee weighed the implications of continuing global uncertainties arising from the dwindling commitment to global cooperation, the strengthening of the U.S. dollar, and the unsteady commodity prices.
The Committee similarly evaluated other challenges confronting the domestic economy and the opportunities for achieving economic growth and price stability in 2017.
The MPC was of the view that whereas the downward trend in inflation in April 2017 is a welcomed development; the rate was still significantly above the policy reference band.
The MPC is particularly pleased with the gradual retreat in inflation, the relative stability in the Naira exchange rate across all segments of the foreign exchange market and the improved prospects of foreign investment inflow.
It also welcomes the passage of the 2017 Budget and called on the relevant authorities to ensure its judicious implementation, especially, the capital budget in line with the Economic Recovery and Growth Plan.
It, however, noted the associated risks to banking system liquidity of the envisaged fiscal injections during the remainder of the year.
Against this risk, the Committee contemplated the prospects of further tightening of monetary policy should the need arise.
The MPC however, noted that further tightening would widen the income gap, depress aggregate consumption and adversely affect credit to the real sector of the economy.
On the financial stability outlook, the Committee noted that in spite of the banking sector’s resilience, the weak macroeconomic environment has continued to exert pressure on the banking system.
The MPC urged the CBN to intensify its surveillance, in order to address emerging vulnerabilities. The Committee also called on the DMBs to step up credit to the private sector to support economic recovery and convey a positive feedback to the financial system.
CBN Retains Lending Rate at 14%, CRR at 22.5%
By Joseph INOKOTONG