Monetary Policy Committee Urges FG To Build Buffers, Tackle Security Challenges in Nigeria

***Retains Monetary Policy Parameters At Constant

By CLEMENT NWOJI, Abuja

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has asked the Federal Government to “urgently build buffers through a more realistic benchmark of oil price for the Federal Budget.”

The MPC said its advice is hinged on consideration of the continued slowdown in the global economy and the persisting uncertainties, including the ongoing trade wars between the US and its major trade partners, financial fragilities in a number of countries, the debt-constrained fiscal operations of most EMDEs, including Nigeria, and the volatility in the oil market.

Further, it called for caution following the increase in inflation in the month of April, advising for a close monitoring of the uptick in inflationary pressures in April 2019, driven largely by food shortages during the Easter season, the commencement of the planting season as well as persisting security challenges in some of the food producing regions of the country.

The CBN Governor, Godwin Emefiele, stated these while reading communique released at the end of the two-day meeting of the MPC held at the Corporate headquarters of the apex bank in Abuja.

This is even as the MPC resolved to retain at constant all the monetary policy parameters. Thus, it resolved to :Retain the MPR at 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.

Also, it noted the steady accretion to external reserves, which stood at US$45.42 billion as at May 16, 2019, an increase of 2.20 per cent from US$44.44 billion at end-April 2019.

However, the Committee, urged the relevant authorities to strengthen efforts to address the security challenges and improve food production just as it encouraged financial intermediating institutions to ensure that loans to the agricultural sector were channelled effectively to end users

MPC noted that although the Non-Performing Loan (NPL) ratio moderated, it remained above the prudential benchmark.

Consequently, the Committee considered and recommended to the CBN, a proposal to develop a comprehensive administrative, legal and regulatory framework to speed up the recovery of delinquent loan facilities of the banking system; involving structured engagement with relevant stakeholders and authorities, in order to mitigate credit risk and ultimately open up the credit delivery space in the Nigerian economy.

In view of the abundant opportunities available to banks for unfettered access to government securities, which tends to crowd out private sector lending, the Committee called on the Bank to provide a mechanism for limiting DMBs access to government securities so as to redirect bank’s lending focus to the private sector, noting that this would spur the much needed growth in the economy.

It called on the Government to use all machinery at its disposal to increase tax revenue to enable the government fund its budget adequately.