The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its two day meeting with the resolutions to retain the Monetary Policy Rate (MPR) at 14 per cent.
The committee also retained the Cash Reserve ratio (CRR) at 22.5 per cent; the liquidity ratio at 30.00 per cent; and retains the Asymmetric corridor at 200 and -500 basis points around the MPR.
CBN governor, Godwin Emefiele said: “In consideration of the challenges weighing down the domestic economy and the uncertainties in the global environment, the Committee decided by a unanimous vote of the 8 members in attendance to retain the MPR at 14.0 per cent alongside all other policy parameters.
According to him, the committee met against the backdrop of slowly improving global growth prospects even as international cooperation continued to be threatened by anti-globalization sentiments in major advanced economies.
On the domestic front, he said the economy had 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.
While the general economic outlook seemed cautiously optimistic for the remainder of fiscal 2017, Emefiele said emerging indicators suggested that economic policy must remain circumspect.
He said, “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 and similarly evaluated other challenges confronting the domestic economy and the opportunities for achieving economic growth and price stability in 2017.
“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.
“The Committee 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,” he said.
Speaking further, the CBN boss noted: “The MPC was, however, concerned that loosening would exacerbate inflationary pressures and worsen the gains so far achieved in the exchange rate of the naira. It was also convinced that loosening would further increase the negative real interest rate as the gap between the nominal interest rate and inflation widens”.
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