CBN Tasks Nigerian Government On Savings For Future Economic Stabilisation

CBN Governor, Emefiele

*As MPC Advocates Government Restraint In Domestic Borrowing

*Retains MPR at 14.0, CRR 22.5, Others

By CLEMENT NWOJI, Abuja

The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) has urged the nation’s federal government to initiate strong stabilization programmes, freeze the growth in its aggregate expenditure as well as the Federal Accounts Allocation Committee (FAAC) distributions in order to create savings needed to stabilize the economy against future oil price related shocks.

Further, the MPC urged the government to strongly exercise restraint in domestic borrowing in order to reduce cost of credit to the private sector which is essential for stimulating economic growth.

These formed the core observations, resolutions and decisions of the Committee after its two-day 260th meeting and the first in 2018 held at the Corporate Headquarters of the Nigeria’s apex bank, Abuja which was attended by nine members of the committee.

The CBN Governor, Godwin Emefiele, disclosed these while briefing Journalists as contained in its communique at the end of the meeting.

He said that in consideration of the positive results arising from the committee’s previous decisions on monetary policies, it resolved to retain the Monetary Policy Rate (MPR) at 14.0 per cent alongside all other policy parameters:Cash Reserve Requirement (CRR) at 22.5 per cent; Liquidity Ratio at 30.0 per cent; and Asymmetric corridor at +200 and -500 basis points around the MPR.
Emefiele however, said although the Committee noted with satisfaction the gradual implementation of the Economic Recovery and Growth Plan by the government in an effort to stimulate economic recovery, it stressed the need for quick passage of the 2018 Appropriation Bill by the National Assembly, so as to keep fiscal policy on track and deliver the urgently needed reliefs in terms of employment and growth for the citizenry.

The Committee, he said noted that the continued low level of lending by banks remains a constraint to growth of the real sector of the economy and advised the Management of the CBN to continue to provide the required policy impetus to engender improved credit delivery by the deposit money banks to the economy.

On inflation, foreign exchange and the external reserves, Emefiele said: “the committee noted the Inflationary pressures in the economy continued to moderate with headline inflation (year-on-year) receding for the thirteenth consecutive month to 14.33 per cent in February 2018 from 18.72 per cent in January 2017.

“The Committee also noted the continuous improvement in the level of external reserves, which stood at US$46.699 billion as at March 29, 2018.

“The Committee noted the relative stability in the foreign exchange market, with declining premia across all segments of the market.

“It observed with satisfaction, the sustained high level of activity at the Investors’ and Exporters’ (I&E) window of the foreign exchange market. The window continues to attract more investors, thus boosting foreign exchange supply.”

The CBN governor said the Committee members were optimistic on the future of the nation’s economic growth which however, he said is predicated on certain conditions.

According to him, “Forecasts of key macroeconomic indicators give a positive outlook for the Nigerian economy in 2018. This is predicated on the quick passage and effective implementation of the 2018 budget, improved security, foreign exchange market stability as well as favourable crude oil prices.

“On the downside, the Committee noted the potential impact of the 2019 election-related spending, against the weak backdrop of tax revenue efforts, herdsmen related violence and rising yields in the advanced economies. Indications in the US and the UK point to higher interest rates in the short to medium term.”

“The Committee was concerned about the fiscal distortions associated with absence of buoyancy between GDP growth and tax revenue, and urged the fiscal authorities to deploy appropriate corrective measures to address this phenomenon. ”