Central Bank of Nigeria (CBN) has said that, it has kept the Monetary Policy Rate (MPR) otherwise known as the lending rate at 12 per cent for six consecutive months.
Making the announcement in Abuja at the end of the 97th Monetary Policy Committee (MPC) meeting, Governor of the apex bank, Mr. Godwin Emefiele, said the bank also retained the public sector Cash Reserve Requirement (CRR) at 75.0 per cent and the private sector CRR at 15 per cent.
Emefiele said the decision to retain the key economic rates was borne out of the committee’s satisfaction with the relative stability of the Nigerian economy while also noting the key risks that lay ahead.
The key risks, according to him, include the possibility of capital reversal as the Fed’s Quantitative easing in the US finally ends in October amidst dwindling oil output and declining oil prices, domestic security challenges and upward trending headline inflation.
The committee, he said, expressed concern about high banking system liquidity and its potential effects on inflation and the exchange rate, adding that the policy challenges would include sustaining the stability of the naira exchange rate, managing the vulnerability to capital flow reversal, building fiscal buffers to guard against global shocks, managing inflation and exchange rate expectations and buildup in election related spending.
“The committee welcomed the efforts by government to address some of the constraints and risks to economic activity like the insurgency in the North-East and the Ebola Virus Disease epidemic. It noted that as progress was being made in these areas and in respect of other constraints like power and improving SME financing, the outlook for growth appears right and prospects for upward price pressure would be moderated.
The committee further noted that the restrictive stance of monetary policy provided important defences against structural liquidity in the banking system and also reaffirmed the willingness to play a key role in managing expectations around exchange rate and inflation vulnerabilities.
On domestic economy, the governor noted the continued resilience as Gross Domestic Product (GDP) grew by 6.54 per cent in Q2, 2014 compared with 5.40 per cent in the corresponding quarter of 2013.
He said the observed growth rate also surpassed the 6.21 per cent recorded in Q1 of 2014. The Governor further remarked that the non-oil sector remained the main growth driver, recording 6.71 per cent in Q2, 2014 and the corresponding quarter of 2013 respectively.
“The decline in growth of non-oil GDP was traced to the decline in agriculture output, construction, trade and services relative to the levels recorded in Q1, 2014. The slowdown in agriculture output was attributed to the insurgency activities in the North Eastern axis and some parts of the North,” he explained.
Source : SunOnline