The monetary policy Committee(MPC) of the Central Bank of Nigeria(CBN) has urged the National Assembly on the quick passage of the 2018 Appropriation bill recently presented by President Muhammadu Buhari, so as to keep fiscal policy on track and deliver the urgently needed reliefs in terms of employment and growth of the economy. Governor of the CBN, Mr. Godwin Emefiele stated this shortly after the last meeting of the MPC held at the CBN headquarters in Abuja. Emefiele also said that the Committee decided by a vote of 8 to 1 to retain the Monetary Policy Rate (MPR) at 14.0 per cent alongside all other policy parameters. One member voted to reduce the MPR by 100 basis points.
The committee also retained the Cash Reserve Ratio(CRR) at 22.5 per cent; left the Liquidity Ratio still at 30.0 per cent; and retained the Asymmetric corridor at +200 and -500 basis points around the MPR. On financial stability, the Committee noted the concentration of non-performing loans in a few sectors but observed that the overall condition and outlook for the banking system was stable as deposit money banks’ balance sheets remained strong. This assessment, according to Emefiele, is strengthened by developments in the national accounts and the expectations that the affected sectors are returning to growth, but however urged further strengthening of supervisory oversight and deployment of early warning systems in order to promptly identify vulnerabilities and proactively manage emerging risks in the banking system.
The Committee further observed that government was increasing debt, both domestically and externally, thus crowding out the private sector. In arriving at its decision, the Committee appraised potential policy options in terms of the balance of risks. The Committee also took note of the gains made so far as a result of its earlier decisions; including the stability in the foreign exchange market and the moderate reduction in inflation and thus extensively deliberated the options regarding whether to hold, tighten or ease the policy stance. While tightening would strengthen the impact of monetary policy on inflation with complementary effects on capital inflows and exchange rate stability, it nevertheless could also potentially dampen the positive outlook for growth and financial stability. On the other hand, whereas loosening would strengthen the outlook for growth by stimulating domestic aggregate demand through reduced cost of borrowing, it could aggravate upward trend in consumer prices and generate exchange rate pressures.
The Committee also feels that loosening would worsen the current account balance through increased importation. On the argument to hold, the Committee believes that key variables have continued to evolve in line with the current stance of macroeconomic policy and should be allowed to fully manifest. Members noted that the developments in output and inflation in particular required effective close monitoring in order to gain clarity on the medium term optimal path of monetary policy.