The Central Bank of Nigeria’s Monetary Policy Committee retained its Monetary Policy Rate at 14% following the conclusion of its two day meeting at the CBN Head Office in Abuja.
Briefing reporters, The CBN Governor, Godwin Emefiele, explained this decision saying ‘“Given its primary mandate and considering the limitations of its instruments with respect to output and conscious of the need to allow this and other measures like the foreign exchange market reforms to work through fully, the Committee decided to retain the MPR at 14.00 per cent, the CRR at 22.5 per cent, the Liquidity Ratio at 30.00 per cent, and the Asymmetric Window at +200 and -500 basis points around the MPR.”
He further explained that the tendency for commercial banks to channel credits to traders who demand forex and pile pressure on the Naira rather than to farmers and manufacturers played an important part in their decision.
“There was a time when the MPC took a decision not only to reduce the monetary rate but also the cash reserve. These were intended to lower rates and encourage spending by the private sector. After we did that, because we did not see the impact on the private sector, we further reduce the CRR from 30.5 per cent to 25 per cent. The sum of N1 trillion was injected into the economy through the banks to loan this money but rather than loan this money, those credits went to traders who used them to demand for foreign exchange thereby putting pressure on the foreign exchange market.”
The CBN in contrast to its decision in its meeting in August chose to ignore the inflation rate of 17.6% noting that “the month-on- month evolution of consumer price inflation has been less phenomenal.
The MPC further noted that “the pressure on consumer prices continues to be associated with reform-related legacy and structural factors including high costs of electricity, transport, production inputs, as well as higher prices of both domestic and imported food products”. It also opined that “with the onset of the harvest season, the restrictive stance of policy as well as the flexible FX regime, prices will begin to taper in the fourth quarter.”
The about 3,197 word communique was perhaps the most comprehensive we have seen in the Emefiele era and revealed a more overwhelmed Central Bank who has had to carry the blame for a dwindling economy in recession despite the fact that there is a fiscal side to the economy that they had no control over. The MPC noted on many occasions in the communique that most of its policies had failed to yield the desired results as it lacked the compliment of stronger fiscal policies.
These were the summary of decisions taken.
(i) Retain the MPR at 14.00 per cent;
(ii) Retain the CRR at 22.5 per cent;
(iii) Retain the Liquidity Ratio at 30.00 per cent;
(iv) Retain the Asymmetric Window at +200 and -500 basis points around the MPR
Parts of this article originally appeared in The Nation Newspapers