By Christel Odili
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has for the 9th consecutive time voted to retain the benchmark lending rate at 14 percent.
The CBN Governor, Mr. Godwin Emefiele, who addressed a press conference in Abuja on Wednesday, said, the MPC unanimously voted to retain key rates. He disclosed that the decision to raise the key interest rate to 14 percent was made in July 2016 and has been kept at the same level since then. At 14 percent, Nigeria’s MPR is currently at its highest in at least 12 years.
Emefiele said the decision to retain the policy rates was geared at fighting inflation and strengthening the economic outlook for Nigeria’s growth.
According to him, “Committee was of the view that further tightening would strengthen the impact of monetary policy on inflation with complementary positive effect on capital flows and exchange rate stability,” he said.
“Nevertheless, it could potentially dampen the positive outlook for growth and financial stability. Committee is of the view that loosening will strengthen the outlook for growth by stimulating domestic aggregate demand through reduced cost of borrowing.
“This may, however, lead to a rise in consumer prices, generating exchange rate pressures on the currency in the process.
“The committee believes that key variables have continued to evolve in line with the current stance of macro-economic policy and should be allowed more time to fully manifest.
Emefiele said that the economic outlook for 2018 remained positive but hinged on the early passage and execution of the 2018 budget.
He also said that the country’s economic growth was based on improved security, foreign exchange market stability as well as favorable crude oil prices.
“On the downside, the committee noted the potential impact of the 2019 elections related spending against the weak backdrop of tax revenue efforts and herdsmen related violence,’’ he said.
“In consideration of the foregoing, committee decided unanimously by a vote of all members present to retain monetary policy rate (MPR) at 14 percent alongside all other policy parameters.
“Consequently, MPC voted unanimously to retain MPR at 14 percent, CRR (cash reserve ratio) at 22.5 percent, liquidity ratio at 30 percent, and asymmetric corridor at +200 basis points and -500 basis points around the MPR.”
Emefiele said that the MPC members also expressed worry over the quantum of nonperforming loans and also the lending rate to customers in the banking sector.
“However, as government pays off its huge contractor debts, a sizable portion of this non-performing loans will be addressed,
“We have been very clear about this, the size of contractor’s debt is N2.7 trillion. Because these debts are unpaid, the contractors are unable to service or pay back their loans at the banks.
“The CBN itself stands ready to accord some form of liquidity status to some of these debts and through that mechanism, we believe the NPL will recede. After that, commercial banks can now continue to play their role which is to catalyze growth and support credit delivery to the Nigerian economy,’’ he said.