Published On: Wed, May 22nd, 2019

CBN retains MPR at 13.5%, calls for urgent tackle of insecurity, unemployment, Others

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By Etuka Sunday

The Central Bank of Nigeria (CBN) yesterday at its Monetary Policy Committee (MPC) meeting retained Monetary Policy Rate (MPR) at 13.5% and all other key parameters.
Rising from its meeting in Abuja, the MPC Chairman who doubles as the Governor of CBN, Mr Godwin Emefiele said, nine (9) members out of the eleven committee members voted to retain the MPR at 13.5%.
Mr Emefiele said, the MPC noted that the 2.01% growth in real GDP in the Q1 of 2019 compared to 1.89% in the corresponding quarter of 2018.
He said, although output growth in the Q1 was slow than 2.3% recorded in the preceding quarter, it emphasized that actual output remains well below the economy’s long run potential indicating the existence of spare capacity for noninflationary growth in the economy and opportunity which should be explored through increased credit delivery to the private sector.
Not impressed by the flow of credit from the deposit money banks to the private sector, the MPC called on the CBN management to urgently put in place modalities to promote consumers and mortgage lending in the Nigeria economy noting that doing this will greatly and positively impact on the flow of credit and ultimately result in output growth.
The MPC called for a close monitoring of the optic in inflationary pressures in April 2019 driven widely by food shortages during the Easter season, the commencement of the planting season as well as persistent security challenges in some of the food producing region of the country.
The committee urged the relevant authorities to stiffen efforts to address the security challenges and improve food production, it encourage financial intermediating institutions to ensure that loans to the agricultural sector were channelled effectively to end users.
Mr Emefiele said, the committee in its considerations argued that although there was improvement in the macro economic variables in the country, there are still challenges ahead.
”At this time we’ve seen what we can call a relative improvement in the macro economic variables in Nigeria; exchange rates being stable, reserves looking good and inflation moderating downward. But it is also important for me to say that there are still challenges ahead.
”If we consider that notwithstanding the improvements in the macro economic variables that inflation still has its own pressures arising from issues bothering from prices and supply shortages for food, issues bothering on unemployment and the need for us to think on how to diversify our economy, I will say the challenges ahead are still enormous but we would need your support.
“In this next phase there will be a need for us to aggressively be thinking about how do we reduce the level of unemployment and increase the level of employment in the country. I must confess that yes there is a relationship between employment level, improved economy and security in the country. We all have to work together.
“Those who are making life difficult for people to go to their farms, to be able to produce or conduct their farming activities we use this opportunity to appeal to them to please allow our farmers particularly in the food producing belt of the country who are affected to allow these farmers go to farm.
“When people go to farm they get employed and make food available, feed their families and employ other people. And when they do so ultimately it reduces the level of insecurity in our country.
”The economy growing at 2percent is suboptimal if we consider that this country population grows at an average of over 2.7 percent per annum. And of the fact that you might have heard me saying it is saddening that we will be the third largest population in the world in 2050, even higher than America but following India and China.
It’s not a good story but what it also means is that we have a lot of work to do to be able to feed and provide food to be able to employ the mass of people that will be created as well,” he said.
Responding to a question on Non Peforming Loans, Emefiele said, “you’ll, recall, the prudential is that banks must not have more than five percent in NPL but I must say that at this time it’s about 9-10 percent on the average which is a significant improvement from where it was a year or two ago. About a year or two ago it was close to 15 percent and moderated to 10 percent and we say it’s a substantial and significant and an encouraging improvement in a level of NPL. And I do think that with the steps that would be taken, by the central bank to support the banks through administrative, legal and regulatory framework, certainly we would see to it that NPLs are brought down so that DMBs are encouraged to go back and begin to lend money more aggressively to those sectors that they considered to be risky,” he said.
On oil benchmark, he said, “I think the oil benchmark is about $60 per barrel that has been budgeted for at 2.3 barrels per day. Now that price is almost at 70, what we are saying is that there is no need to begin to say let us spend if we make more money and so increased the budget benchmark maybe from $60pb to $69pb because you believe that price is good. What that does for instance is that the buffer between $72 or $74 that it is right now and the $60 budgeted, if you realised the money, save it and build buffer for a rainy day when it does happened,” he said.

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