***As External Reserves Hit $44.88 Billion

By CLEMENT NWOJI, Abuja

Monetary Policy Committee (MPC) has tasked the Nigeria’s fiscal policy managers, authorities as well as federal executives to increase the economy’s tax base to boost the nation’s Internally Generated Revenue (IGR) and reduce the growing public borrowing.

It also asked the Federal Government to resuscitate moribund industries in Nigeria and improve key infrastructure in order to strengthen the productive base of the economy, create job opportunities as well as boost exports if it expects the Nation to ripe the benefits of the recently accented African Continental Free Trade Agreement (AfCFTA).

The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele said these while reading communique of the MPC after its two day meeting at the Corporate headquarters of the Bank in Abuja.

This is even as the accretion to external reserves, which stood at US$44.88 billion as at July 19, 2019, representing a 0.38 per cent increase from US$44.71 billion at the end-June 2019.

He said the Committee noted that the downside risks to the nation’s growth projections include low credit to the private sector; high unemployment; delayed intervention of fiscal policy as well as low revenue and fiscal buffers, amongst others.

However, he said the continued intervention by the Bank in the real sector is expected to partly ameliorate the downside risks only in the short-run, while sound fiscal policy is expected to drive growth in the medium to the long-run.

According to the CBN Governor, “The MPC called on the fiscal authorities to expedite action on expanding the tax base of the economy to improve government revenue and stem the growth in public borrowing. It further urged the fiscal authorities to build fiscal buffers to avert macroeconomic downturn in the event of a decline in oil prices.

“On the African Continental Free Trade Agreement (AfCFTA), the Committee urged the Federal Government to put in place measures to aid the economy in realising the benefits and full potentials of that Agreement. In particular, it noted the need to resuscitate moribund industries in Nigeria and improve key infrastructure in order to strengthen the productive base of the economy, create job opportunities as well as boost exports.

“The MPC further noted that although inflation moderated in June 2019, the continued pressure on prices continues to be associated with structural factors such as the high cost of electricity, transport and production inputs.

“The MPC, however, expects that with the commencement of the harvest season, food prices will taper further downwards. It thus, however, advised that the security challenges in some parts of the country should be addressed urgently to increase agricultural produce in order to sustain the downward trend in inflation.

On the domestic economy, Emefiele said that output growth in 2019 is expected to remain weak, peaking at 2.27 per cent, while inflation is projected at 11.37 per cent by the CBN staff projections by end-2019.

“The underlying arguments in favour of this forecast include: favourable oil prices; stable exchange rate; moderate inflationary pressures; enhanced flow of credit to the private sector; sustained CBN interventions in the real sector; effective implementation of the Economic Recovery and Growth Plan (ERGP); building fiscal buffers; and improved security in the food producing areas of the country”, he explained.

The Committee also called on the Bank to intensify efforts to encourage Nigerians in the diaspora to use official sources for home remittances, noting that the effort will complement other measures geared towards improving Nigeria’s current account balance.

It enjoined the Bank to consider introducing incentives such as the reduction of charges on diaspora home remittances into Nigeria.

On the whole, the Committee members resolved to hold all policy parameters constant as follows: MPR at 13.5 per cent; Retain the asymmetric corridor at +200/-500 basis points around the MPR; retain the CRR at 22.5 per cent; and
retain the Liquidity Ratio at 30 per cent.