- Timely Implementation of ERGP’ll End Recession
The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday called for the timely implementation of the recently launched Economic Recovery and Growth Plan to take the country out of recession.
The committee, in a communique that was read by the CBN Governor, Mr. Godwin Emefiele, after its two-day meeting in Abuja, also called for the judicious execution of the 2017 budget, which was recently passed by the National Assembly.
It said while the fiscal authorities work towards the implementation of the ERGP and the budget, the apex bank should sustain its recent intervention in the foreign exchange market in order to accelerate growth and restore confidence in the economy.
However, it said there were downside risks that might limit the potential for growth.
Some of them are the possibility of low oil prices due to renewed investments in shale oil exploration and production; continuing monetary policy normalisation by the United States Fed, which may result in strengthening of the US dollar; and consequent capital reversal from Nigeria and other emerging market economies.
Also, the MPC believes that the inflation outlook does not pose significant threat as the limit of the base effect driving the current moderation in prices may have been reached.
Emefiele said, “The committee welcomes the passage of the 2017 budget and called on the relevant authorities to ensure its judicious implementation, especially the capital budget, in line with the Economic Recovery and Growth Plan.
“It, however, noted the associated risks to banking system liquidity of the envisaged fiscal injections during the remainder of the year.”
In consideration of the challenges weighing down the domestic economy and the uncertainties in the global environment, the CBN governor said the committee decided by a unanimous vote of the eight members in attendance to retain the Monetary Policy Rate at 14 per cent.
Apart from the MPR, he said the committee also voted to retain the Cash Reserves Ratio at 22.5 per cent.
Also retained were the Liquidity Ratio, which was left at 30 per cent; and the Asymmetric Window, which was left at +200 and -500 basis points around the MPR.
In reaching these decisions, Emefiele explained that the MPC was reluctant to alter the current policy configuration in any fundamental manner as its intention was to allow the existing policies to fully achieve their intended goals and objectives.
On the other hand, he said the MPC noted that the cost of capital in the economy remained high and not helpful to growth.
Emefiele stated, “The MPC was, however, concerned that loosening would exacerbate inflationary pressures and worsen the gains so far achieved in the exchange rate of the naira.
“It was also convinced that loosening would further increase the negative real interest rate as the gap between the nominal interest rate and inflation widens.”
The governor explained that the MPC urged the CBN to intensify its surveillance in order to address emerging vulnerabilities.