The Monetary Policy Committee (MPC) on Tuesday, once again voted against the widely speculated Naira devaluation.
The Central Bank of Nigeria (CBN) governor, Godwin Emefiele, said interest rates would instead be reduced to further ease the liquidity in the economy. Explaining that the current global oil glut is expected to remain for a long time and as such it is imperative to prepare for longer period of low government revenue from oil sources.
According to the governor, the 12 member committee voted unanimously to keep the rate unchanged. Monetary Policy Rate (MPR) remains 11 percent, while Cash Reserve Requirements stood at 20 percent and liquidity ratio 30 percent.
The Naira will continue to exchange at the official rate N197-N199 to the dollar, but parallel market rate is expected to rise above N300 as a result of CBN refusal to devalue the Nigerian Naira.
However, the governor defended the forex restrictions, insisting its working as local manufacturers, especially locally produced food had witnessed increase sales since the policy was implemented.
“It has been positive,” he said.
“There is wide room for optimism about the medium to long term macro-economic prospects… especially given the clarity in the policy direction of the administration, the various interventions in the real sector, gradual improvements in the power sector and the reinvigorated fight against corruption.”
International Monetary Fund (IMF) director, Christine Largade, during her visit to Nigeria advised CBN to devalue in order to ease the tension in the economy by adjusting its policy to accommodate the current gap created by lower oil prices.
But CBN insisted it would rather reduce interest rates to encourage borrowing and job creation.
