By Tunji Andrews

The Monetary Policy Committee (MPC) has retained the lending rate (MPR) at 12% after its meeting on Tuesday in Abuja. The Central Bank Governor, Godwin Emefiele, said the committee, after considering global economic indicators also retained Cash Reserve Requirement (CRR) of public sector fund at 75% and that of private sector at 15%. Also, the MPC voted to retain the MPR at 12% with a corridor of +/- 200 basis points around the midpoint; while retaining the Liquidity Ratio at 30%.

“The committee unanimously voted to retain the current rate of the monetary policy and in addition, one member voted for an asymmetric corridor around the MPR. Consequently, the committee voted to hold the MPR at 12%, keep the CRR on public sector deposits at 75% and CRR on private sector deposits at 15%,” he said.

“The committee also expressed concern over the eroded fiscal buffers which have exposed the economy to vulnerabilities arising
from both domestic and external shocks. The erosion has accentuated the regime of persistently high interest rates, elevated demand for foreign exchange and declining reserves accretion,” he added.

According to him, the committee noted the potential of the power sector to stimulate output growth through enhanced investment and the spill-over effect in employment generation if the challenges confronting the sector are effectively and appropriately addressed. Specifically, it noted that gas-to-power has remained a binding constraint in reaping the benefits of the recently-concluded power sector reforms; urging for the collective efforts of government, private investors and the banks to resolve. Other pressure points include the underlying pressure from food/core inflation and the risks that could emanate from the likely increase in aggregate spending in the run up to the 2015 general elections.

Emefiele said that the committee noted the mixed signals over the global growth prospects in the advanced, emerging and developing economies, adding that the committee was satisfied with Nigeria’s overall domestic economic environment which remained stable with inflation contained within the target range.

He said the committee welcomed the moderation in the rate of depletion in external reserves in recent months, noting that reserves accretion needed to improve much faster to provide a strong and more resilient buffer to fiscal operations. The Committee, however, noted that a gradual reduction in the country’s import bills through domestic production of some of the major food imports should be a key element in the overall reserves accretion strategy. It welcomed the decision of the Bank to collaborate with other stakeholders in this regard.

Sola