From Uche Usim, Abuja
Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, yesterday, gave reasons why the Monetary Policy Committee (MPC), retained all the key economic parameters for the sixth consecutive time after yesterday meeting in Abuja.
The committee voted (6:1) to maintain the Monetary Policy Rate (MPR) at 14 per cent, Cash Reserve Ratio (CRR) at 22.5 per cent, Liquidity Ratio at 30 per cent and retained the Asymmetric Corridor at +200 and -500 points around the MPR.
According to Emefiele, the committee believes that the effect of the fiscal policy action towards stimulating the economy has begun to manifest as evidence in the exit of the economy from the 15-month recession.
“Although the recovery seems fragile, the fragility of the growth makes it imperative to allow more time to make appropriate complementary policy decision to strengthen the recovery.
“Secondly, the committee was of the view that economic activities would become clearer between now and Q1 of 2018 when growth is expected to have sufficiently strengthened and gained in receding inflation very obvious.
“The most compelling argument for a hold was to achieve more clarity in the evolution of key macro economy indicators including budget implementation, economic recovery, exchange rate, inflation and employment generation,” he stated.
The CBN Governor assured that the MPC remains committed to employing maximum flexibility to guide the economy on the path of utmost growth.
“Six members voted to retain MPR and all other parameters at their current level while one member voted to lower the MPR to signal an ease to the current stand of tight monetary policy.
“However, majority of the members expressed a strong commitment to policy flexibility that will allow the committee to promptly take the necessary action that will promote overall macro economic stability and engender sustainable growth.
On banks’ non-performing loans, he said the CBN was assessing their risk portfolio to ensure things are in order, adding that the banks have been advised to lower their risk acceptance criteria to enable more Small and Medium Enterprises (SMEs) access loans for business.
The committee, according to Emefiele, noted that money supply (M2) contracted by 11.06 per cent in August 2017 (annualised), in contrast to the provisional growth benchmark of 10.29 per cent for 2017. The development in M2 is largely due to the contraction of 18.42 per cent in other assets net (OAN) in August 2017.
Similarly, M1 contracted by 12.25 per cent in August 2017, (annualised to -18.37 per cent). Net Domestic Credit (NDC) contracted by 0.14 per cent, annualised at -0.20 per cent, driven majorly by net credit to government, which also contracted by 1.05 per cent against the programmed growth of 33.12 per cent. Credit to the private sector, however, grew marginally by 0.07 per cent in August 2017, compared with the provisional benchmark of 14.88 per cent. The MPC also noted the policy constraints in ensuring the flow of credit to the real sector in the face of weak and under-performing monetary aggregates.
“Inflationary pressure in the economy continued to moderate with headline inflation (year-on-year) receding for the seventh consecutive month to 16.01 per cent in August 2017, from 16.05 per cent in July 2017. Food inflation declined slightly to 20.25 per cent in August 2017 from 20.28 per cent in July 2017, while core inflation increased to 12.30 per cent in August 2017 from 12.21 per cent in July 2017. This development was attributed to the contraction in money supply, decline in imported food and non-food prices, favourable base effects, and the moderating effects of stable exchange rates. The committee, however, noted that the high food inflation was traceable to rising prices of farm inputs and supply shortages, intermittent clashes between farmers and herdsmen, as well as weak harvest, due to increased flooding of farmlands,” he stated.