The Central Bank of Nigeria (CBN) has highlighted how Nigeria’s economy continues to be weighed down by high import bills.
In its communique No 148 of the 291st meeting of the Monetary Policy Committee (MPC) held recently, it stated that the high import bill has in turn led to pressure on foreign exchange and a resultant increase in the general price level.
The committee however noted that the economy needs to build up the stock of foreign reserves to act as buffers against shocks.
Raising the MPR to 18.5% from 18.0% whist retaining the Asymmetric Corridor of +100/-700 basis points around the MPR as well as the CRR at 32.5% and the Liquidity Ratio at 30%, it cited that the continued rise in headline inflation, albeit moderately, remained the biggest challenge confronting macroeconomic stability in Nigeria.
Members noted that the current uptrend in inflationary pressure was driven by a combination of both demand and supply side issues, hence suggesting the need to continue to address the demand-side issues falling within the ambit of its policy tools.
In the view of Members, headline inflation remained high due largely to a host of non-monetary issues outside the reach of the central bank such as the perennial scarcity of Premium Motor Spirit (PMS) and expectations of short-term hikes in the pump price of PMS; high and rising price of various energy sources; and a host of headwinds confronting the food supply chain.
According to the bank, broad money supply (M3) in April 2023 grew by 22.11% (annualized), largely driven by the increase in Net Domestic Assets (NDA). It added that the money market reflected the relatively tight liquidity conditions in the banking system.
Consequently, the monthly weighted average Open Buyback (OBB) and Inter-bank Call rates increased to 17.05% and 15.80% in April 2023, from 14.07% and 14.75% in March 2023, respectively.
The Committee stated that there is sustained stability in the banking system, evidenced by the performance of the Financial Soundness Indicators (FSIs). The Capital Adequacy Ratio (CAR) stood at 12.8%, Non-Performing Loans (NPLs) ratio at 4.4% and Liquidity Ratio (LR) at 45.3%, as of April 2023.
Commenting on the lull in the equities market in recent times following end-of-year activities by several companies on the Exchange, the committee noted that the All-Share Index (ASI) and Market Capitalization (MC) declined to 52,403.51 and N28.53 trillion on April 28, 2023, from 55,806.26 and N30.40 trillion on February 28, respectively.
The Committee, also, noted the moderate decline in the level of gross external reserves to $34.91 billion in April 2023, from $35.14 5 billion at end-March 2023, attributable to transactions in the foreign exchange
