BY ODILI CHRISTEL
The Central Bank of Nigeria has retained the Monetary Policy Rate at 14% for the 4th consecutive time as they battle to grow an economy
which is in its worst case of inflation in more than a decade.
Governor Godwin Emefiele told reporters after the Monetary Policy Committee (MPC) meeting held on Tuesday at the nation’s capital, Abuja.
CBN Governor, Godwin Emefiele says the slowdown in inflation rate in February was partly due to base effects.
The government said increased production of oil will help to stabilize the foreign-exchange rate and provide more funds to stimulate the economy.
The apex bank has regularly sold dollars to keep the naira between 305 and 320 against the greenback over the past four months.
As part of its resolve the committee, which had 9 of its 10 members present, also retained the liquidity ratio at 30% and the Cash Reserve Ratio (CRR) at 22.50%., and one favored increasing the rate.
“The committee in consideration of the headwinds in the domestic economy and the uncertainties in the global environment, decided by a unanimous vote to retain the MPR at 14% alongside all their policy parameters,” Emefiele said.
“MPC decided to retain MPR at 14%, reatin CRR at 22.5%, retain the liquidity ratio at 30% and retain the asymmetric* corridor at +200 and -500 basis point around MPR.
“The committee noted that the average naira exchange rate remains stable at the interbank market of the foreign exchange market during the review period.
“The medium term outlook based on available data and forecast of key economic variables indicate a more resilient economy in 2017, growth is expected to turn positive as the fiscal space becomes more accommodating.
“In addition, the agricultural sector is expected to play a more significant role in driving growth, given the expansion of the anchor borrower programme as well as other developmental initiatives of the government.
“Data released by the National Bureau of Statistics (NBS) in February 2017 showed that the economy contracted marginally by 1.30 per cent in Q4 2016, effectively remaining in recession since Q2 2016. Overall, in 2016, the economy contracted by 1.51 per cent, with the contraction in Q4 being the least since Q2 2016. The non-oil sector grew by 0.33 per cent in Q4, largely reflecting the slowdown in the agricultural sector, which decelerated to 4. 03 per cent in Q4 2016 from the 4.54 per cent recorded in Q3 2016. The Committee remains of the conviction that fiscal policy remained the most potent panacea to most of the key negative undercurrents i.e. stunted economic activity, heightened unemployment and high inflation”.
“The Committee also noted the benefits of loosening at this time which will be in line with the needs of fiscal policy to restart growth. The MPC, however, noted that loosening would exacerbate inflationary pressures, worsen the exchange rate and further pull the real interest rate into negative territory. Since interest rates are sticky downwards, loosening may not necessarily transmit into lower retail lending rates”.
The Committee noted the consecutive positive contribution of agriculture to GDP in Q4 2016, a development partly traceable to the Bank’s interventions in the sector. The Committee remains optimistic that, if properly implemented, the newly released Economic Recovery and Growth Plan (ERGP) coupled with innovative, growth-stimulating sectoral policies would help fast track economic recovery.