By Etuka Sunday
The Central Bank of Nigeria (CBN) yesterday took a loose stand at its 266th Monetary Policy Committee (MPC) Meeting by slashing the Monetary Policy Rate (MPR) from 14 percent held since 2016 to 13.50 percent.
CBN said, the Committee noted that having achieved a relatively stable exchange rate with price stability, it is imperative that monetary policy should explore the next steps necessary for enhancing growth, reducing unemployment and diversifying the base of the economy.
Addressing newsmen shortly after the meeting, the CBN’s Governor, Mr Godwin Emefiele said, the MPC decided by a vote of six out of eleven members to reduce the Monetary Policy Rate (MPR) by 50 basis points.
Mr Emefiele said, two members voted to reduce the MPR by 25 basis points, while one member voted to reduce it by 100 basis points. Two members, however, voted to hold the MPR at its current level. Ten members voted to hold all other parameters constant, while a member voted to reduce the Cash Reserve Ratio (CRR) by 100 basis points from 22.5 to 21.5 per cent.
Consequently, he said, “the MPC voted to: Adjust the MPR by 50 basis points from 14.00 to 13.50 per cent; Retain the asymmetric corridor of +200/-500 basis points around the MPR; Retain the CRR at 22.5 per cent; and Retain the Liquidity Ratio at 30 per cent”.
He said, the Committee was convinced that doing this would further uphold the Bank’s commitment to promoting strong growth by way of encouraging credit flow to the productive sectors of the economy.
Emefiele said, the MPC felt that signalling through loosening by a marginal reduction would serve to manage the sentiments in the capital markets owing to the wider spread in yields in the EMDEs, relative to the advanced economies. Moreover, the real interest rate in the country would still remain positive.
Speaking on the domestic economy, he said, available data on key macroeconomic indicators for output growth in the first quarter of 2019, and forecasts for the rest of the year, suggests continued positive outcomes.
“Based on recent projections, the economy is expected to grow by 2.0 per cent (IMF), 2.2 per cent (World Bank) and 2.74 per cent (CBN).
“The projection is hinged on: the enhanced flow of credit to the real sector; sustenance of a stable exchange rate; moderating inflation rate; CBN special interventions in growth-enhancing sectors, especially, agriculture and non-agricultural SMEs; improved growth in the non-oil sector and the effective implementation of the ERGP by the Federal Government, amongst others,” he said.
The apex bank head said, the Committee expressed optimism that the establishment of the NIRSAL National Microfinance Bank and the enactment of the Secured Transactions in Movable Assets Act 2017 will stimulate lending to small and medium enterprises.
The Committee however, urged for the speedy passage of the other aspects of the Petroleum Industry Bill (PIB) to fast track the development of the value chain in the sector and create employment. It also welcomes the passage of the National Minimum Wage Bill by the National Assembly and call for its speedy implementation in order to boost domestic aggregate demand.
On a more cautious note, the Committee expressed concern and sympathises with the fiscal authorities, over the growing fiscal deficit, external debt and debt service, and urged the need to closely monitor the public procurement process in order to improve efficiency in public resource management.