At its last meeting in July, the CBN MPC voted to hold all policy parameters constant, believing that it would enable the continued passage of current policy measures in supporting the growth recovery recorded in the second quarter and macro-economic stability.
The Monetary Policy Committee has retained key lending rates at 11.5%.
Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, announced this on Tuesday, saying it is part of efforts to boost the economy towards a sustainable recovery from the recession.
“Members voted in line with the most pressing need towards reversing the recession and achieving medium-term macro-economic stability.
“In view of the fore-going, the committee decided by a unanimous vote to retain all parameters,” Emefiele said.
“In summary, MPC voted 1, to retain MPR at 11.5%, (2), retain asymmetric corridor of +100 and -700 basis points around the MPR, (3) retain Cash Reserve Ratio at 27.5% and (4), retain liquidity ratio at 30%.”
This comes days after a new report released by the Nigeria Bureau of Statistics, showed that Nigeria had slipped into another recession after the economy shrank in the third quarter of this year.
The Central Bank of Nigeria has cut the Monetary Policy Rate from 12.5 per cent to 11.5 per cent.
Central Bank Governor Godwin Emefiele announced this on Tuesday while presenting a communiqué after the two-day Monetary Policy Committee Meeting in Abuja.
The MPC, however, opted to retain the Cash Reserve Ratio at 27.5 per cent and the liquidity ratio at 30 per cent.
“In the face of declining economic growth and rise in inflation, committee faced a difficult set of policy choices requiring trade-offs and sequencing,” he said.
According to Emefiele, reducing the MPR will put pressure on the deposit money banks to lower cost of credit and the cheaper credit will improve demand, stimulate production, reduce unemployment and support the recovery of output growth.
The Monetary Policy Committee of the Central Bank of Nigeria has retained the monetary policy rate at 12.5 per cent.
Governor of the Central Bank, Mr Godwin Emefiele announced this at the end of the MPC’s meeting on Monday.
Emefiele explained that other parameters were held constant, leaving the CRR at 27.5% and the liquidity ratio at 30%.
He added that the move to tighten will contradict the initiative of expansion of affordable credit to the real sector while increasing MPR at the stage will be counter-intuitive and will result in upward pressure on market rates and cost of production and a further cut will not be realistic
The CBN Governor stated that the earlier loosening to 12.5% in May is yielding positive impact as credit growth increased significantly in the economy and more time needs to be given for the impact to be felt further.
According to him, the nation’s Gross Domestic Product (GDP) grew in the first quarter of 2020.
“Available data from the National Bureau of Statistics showed that real Growth Domestic Product (GDP) grew marginally by 1.87 per cent in the first quarter of 2020 compared with the 2.25 per cent and 2.10 per cent in the proceeding and corresponding quarters of 2019,” he said.
Although the CBN Governor noted that there was a decline in output growth, he, however, attributed the decline to the COVID-19 pandemic.
“The performance was largely driven by 5.06 per cent growth in the oil sector and 1.55 growths in the non-oil sector. The decline in output growth in the first quarter was largely attributed to the decline in the oil prices and the shock from the COVID-19 pandemic.
“The Committee observed the gradual but persistent decline in the manufacturing and non-Manufacturing Purchasing Indices below the benchmarks. 10 members of the committee were in attendance,” he said.
Eight members of the committee voted in favour of holding the MPR, while two members wanted it reduced.
In addition to the MPR, the Cash Reserve Ratio (CRR) was retained at 27.5 per cent, liquidity ratio at 30 per cent, while the Asymmetric Corridor was retained at +200/-500 basis points.
The MPC noted that the rate at which public debt was rising faster than both domestic and external revenue is a major concern that the fiscal authorities should strongly consider.
“The MPC, however, cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread cautiously in interpreting the debt to GDP ratio.
“The Committee also noted the rising burden of debt services and urged the Fiscal Authorities to strongly consider building buffers by not sharing all the proceeds from the Federation Account at the monthly FAAC meetings to avert a macroeconomic downturn, in the event of an oil price shock.”
The committee noted that the reliance on oil should gradually reduce and the Federal Government should ensure that the cost of governance is reduced.
“Government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system.
“The Committee also called on Government to rationalize fiscal expenditure towards reducing the current excessively high cost of governance.”
In December 2019, a total of N716.298 billion was shared between the Federal Government, States, and Local Government Councils.
According to the Deputy Director, Press and Public Relations, Federation Accounts Allocation Committee (FAAC), Henshaw Ogubike, the total sum comprised revenue from Value Added Tax (VAT), Exchange Gain and the Statutory Revenue.
Ogubike stated that as of January 15, 2020, the balance in the Excess Crude Account (ECA) was $324.968 million.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on has left the monetary policy rate unchanged at 14 per cent.
The CBN Governor, Mr Godwin Emefiele, who was speaking at the end of the two-day meeting of the committee in Abuja.
He said that the committee also retained the cash reserves ratio at 22.5 per cent.
He announced that the liquidity ratio was left at 30 per cent; and the asymmetric window kept at +200 and -500 basis points around the MPR.
According to Mr Emefiele, the economy was on the right path but some key sectors continued to experience significant challenges.
“The MPC, however, expressed concern about the tepid growth expectations and growing uncertainty in the global financial markets.
“These uncertainties are arising from the poor reception of the Brexit deal by British politicians, continuing trade war between the U.S. and her major trading partners, as well as the commencement of U.S. sanctions on Iran.”
He further stated that the committee believed that although the domestic economy was recovering modestly from the recession, the recovery was tepid and called for more efforts to strengthen the output and demand.