….says no devaluation of Naira
From the outcome of its first Monetary Policy Committee meeting for 2016, the Governor of the Central Bank,
Godwin Emefiele has said that the apex bank is maintaining the asymmetric corridor of +200 basis points and -700 basis points around the MPR, that this is the second time the apex bank will be retaining the MPR, CRR, Liquidity Ratio and the asymmetric corridor.
Emefiele made this known at the end of the Monetary Policy Committee, (MPC), meeting in Abuja, that Cash Reserve Ratio, CRR, and the Liquidity Ratio were equally retained at 20 per cent and 30 per cent, respectively.
The CBN boss said, while the apex bank had in November taken steps to encourage banks to lend to the real sector of the economy, the impact of that decision was yet to be felt.
According to him, “The committee acknowledge the continuous excess liquidity in the system as well as the tendency of the banks to invest excess reserves in government securities, rather than extend credit to the needed sectors of the economy.
“To this end, the committee once again urges banks to improve lending to the real sector as part of their patriotic obligations to the country.
“We urge them to continue to explore ways of incentivizing lending to employment and growth generating sectors, particularly SMEs.”
Emefiele said the CBN ”cannot regulate interest rate, we cannot force them; all we can do is to put in place policies that will enable them to do what we want. We can continue to incentivise them also by putting in place policies that will encourage them to do this.
“This is a free market; we cannot really compel them as is expected. Until banks decide to work with the CBN, those funds sitting in the CBN vault will not be made available to them.”
“Unfortunately, DMBs are in the business to make money and we cannot regulate their interest rate. And so it can be difficult to really force them to lend to a particular set of people”.
“But what we can continue to do is to put in place policies that will encourage them to do so or we can continue to incentivise them by putting in place policies that will encourage them to do so.
“This is why at the last meeting we reduced CRR from 25 per cent to 20 per cent.
“And we insisted that banks can only enjoy the reduction if they introduce to CBN projects that are targeted at the real sector such as manufacturing, agriculture and the SMEs.”
He said while the episode of low oil prices, which occurred in 2005 lasted for a maximum of eight months, the current situation was expected to continue over a longer period.
It would be recalled that there has been a drop in crude oil prices from a peak of $114 per barrel in July 2014 to as low as $30.25 per barrel as at January 26, 2016.
Emefiele noted that, since oil prices had been on a steady decline, certain trade-offs had to be envisaged and accommodated.
As a result of the drop in oil revenues, Emefiele said the need for consistent, sound and coordinated macro economic policy had become inevitable. He put the balance in the country’s foreign reserve at $28 billion
Speaking on the foreign exchange market, Emefiele said that there is need to improve the supply of foreign exchange to the market, especially from autonomous sources and maintain stability in the naira exchange rate.
“Consequently, it is imperative to brace up for a longer period of low government revenues from oil sources, which would necessitate hard and uncomfortable choices as the economy transits to more sustainable sources of revenue, consistent with the economic realities and strategic objectives of the country. In the circumstance, certain tradeoffs must be envisaged and duly accommodated”.
“The Bank is fine-tuning the framework for foreign exchange management with a view to ensuring a more effective and liquid foreign exchange market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies” he said.