Godwin Emefiele, Central Bank of Nigeria (CBN) governor and chairman of MPC has called on the Security agencies to sustain their checks on the activities of illegal foreign exchange operators in order to bring sanity to that segment of the market.
Emefiele, who spoke after the last Monetary Policy Committee meeting where all the rates were retainded said that “The Committee reiterated that the extant foreign exchange regulation outlaws the trafficking of currency on the streets as some unlicensed operators currently do. Thus, to evolve an appropriate naira exchange rate that stabilizes the foreign exchange market, BDC operators must strictly observe the terms and conditions of their license,” the governor added.
Also, CBN on Tuesday left its benchmark lending rate, the Monetary Policy Rate unchanged at 14 percent, a decision which strongly reinforces its preference for taming soaring prices over pushing growth expansion.
The CBN also retained the Cash Reserve Ration (CRR) at 22.5 percent, Liquidity Ratio at 30 percent and Asymmetric window at +200 and -500 basis points around the MPR.
The CBN also retained the Cash Reserve Ration (CRR) at 22.5 percent, Liquidity Ratio at 30 percent and Asymmetric window at +200 and -500 basis points around the MPR.
The CBN is concerned that risks remain highly elevated on both price and output but considering the importance of price stability and being mindful of the limitations of the monetary policy in influencing output and employment under the conditions of stagflation, the choice for staying rates remained the best option.
“The MPC reiterated the limitations of monetary policy in reversing the current stagflationary condition in the economy, which it traced to supply and demand shocks,” CBN governor Godwin Emefiele stated, announcing the outcome of the Monetary Policy Committee (MPC) meeting in Abuja.
“Members stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations,” he added.
Nigeria’s Gross Domestic Product (GDP) in the third quarter, 2016 contracted 2.24 percent and equally grew negatively for three straight quarters in the year, according to figures from National Bureau of Statistics (NBS) released on Monday.
Inflation has also unfortunately moved up to 18.3 percent and had been in an upward trend since beginning of the year.
Emefiele had at the weekend – though in his own personal views- signaled that rates could be retained because according to him, it would make no sense easing rates at a a time of soaring prices.
But some analysts expected a rate cut to spur growth but Emefiele, while acknowledging that outlook for growth and inflation in the medium term continues to be challenging, notes that the factors instigating them are largely outside monetary policy.
CBN, for instance attributes slowing growth to some undercurrent issues, including shortage of a foreign exchange, low fiscal activity, high energy prices, and the accumulation of salary arrears especially at the subnational level of governments which continued in the third quarter of the year
“Members noted that those conditions could not have been ameliorated directly with monetary policy instruments, but recognised the need to continue to set monetary politics in such a way as to enable fiscal policy the required space to improve public investment in public infrastructure.”
On inflation, the CBN is equally of the view that the incessant pressure on consumer prices continues to come from structural factors including high cost of power and energy, transport, production factors, as well as rising prices of imports which are equally not directly linked with monetary policy decisions.
Besides, while foreign exchange inflows into the economy had improved significantly in July and August, it declined after the September MPC meeting, also exacerbating inflation and increasing negative real interest rates. However, outflows significantly dropped, lending credence to the propriety of the decisions of the July and September MPC meetings.
The Committee also implored the Management to continue to direct more focus at making foreign exchange available to agriculture and manufacturing sectors of the economy by enforcing its policy directing DMBs to allocate 60 per cent of the FX available to these sectors.
The CBN is further worried over implications of the twin deficits of current account and budget deficits, the rise of nationalist sentiments across the West and implications for national elections in France and Germany as well as the forthcoming referendum in Italy.
Other considerations for the latest rate decision include the yet to be unveiled long term uncertainties of Brexit and expectations of significant shifts in US economic policy as CBN reaffirms the urgency of prioritizing the diversification of the economy given the emerging gloomy protectionist outlook of the global economy.
Also as a way to spur growth, the CBN advised the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitizing the debts in order to settle its outstanding domestic contractual obligations which cuts across all sectors of the economy.
“These accumulated debts have slowed business activities of economic agents; most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the Bank to commit to greater surveillance and deployment of early warning systems in managing the banking system,” Emefiele reiterated
“The MPC reiterated the limitations of monetary policy in reversing the current stagflationary condition in the economy, which it traced to supply and demand shocks,” CBN governor Godwin Emefiele stated, announcing the outcome of the Monetary Policy Committee (MPC) meeting in Abuja.
“Members stressed the need for a robust and more keenly coordinated macroeconomic policy framework that would restart output growth, stimulate aggregate demand and rein in inflation expectations,” he added.
Nigeria’s Gross Domestic Product (GDP) in the third quarter, 2016 contracted 2.24 percent and equally grew negatively for three straight quarters in the year, according to figures from National Bureau of Statistics (NBS) released on Monday.
Inflation has also unfortunately moved up to 18.3 percent and had been in an upward trend since beginning of the year.
Emefiele had at the weekend – though in his own personal views- signaled that rates could be retained because according to him, it would make no sense easing rates at a a time of soaring prices.
But some analysts expected a rate cut to spur growth but Emefiele, while acknowledging that outlook for growth and inflation in the medium term continues to be challenging, notes that the factors instigating them are largely outside monetary policy.
CBN, for instance attributes slowing growth to some undercurrent issues, including shortage of a foreign exchange, low fiscal activity, high energy prices, and the accumulation of salary arrears especially at the subnational level of governments which continued in the third quarter of the year
“Members noted that those conditions could not have been ameliorated directly with monetary policy instruments, but recognised the need to continue to set monetary politics in such a way as to enable fiscal policy the required space to improve public investment in public infrastructure.”
On inflation, the CBN is equally of the view that the incessant pressure on consumer prices continues to come from structural factors including high cost of power and energy, transport, production factors, as well as rising prices of imports which are equally not directly linked with monetary policy decisions.
Besides, while foreign exchange inflows into the economy had improved significantly in July and August, it declined after the September MPC meeting, also exacerbating inflation and increasing negative real interest rates. However, outflows significantly dropped, lending credence to the propriety of the decisions of the July and September MPC meetings.
The Committee also implored the Management to continue to direct more focus at making foreign exchange available to agriculture and manufacturing sectors of the economy by enforcing its policy directing DMBs to allocate 60 per cent of the FX available to these sectors.
The CBN is further worried over implications of the twin deficits of current account and budget deficits, the rise of nationalist sentiments across the West and implications for national elections in France and Germany as well as the forthcoming referendum in Italy.
Other considerations for the latest rate decision include the yet to be unveiled long term uncertainties of Brexit and expectations of significant shifts in US economic policy as CBN reaffirms the urgency of prioritizing the diversification of the economy given the emerging gloomy protectionist outlook of the global economy.
Also as a way to spur growth, the CBN advised the Federal Government to urgently assess the extent of its indebtedness to domestic economic agents and develop a framework for securitizing the debts in order to settle its outstanding domestic contractual obligations which cuts across all sectors of the economy.
“These accumulated debts have slowed business activities of economic agents; most of who are indebted to the banking system, thus compromising the integrity of the financial system. It also advised the Bank to commit to greater surveillance and deployment of early warning systems in managing the banking system,” Emefiele reiterated
