By Gloria Emmanuel The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its meeting on Tuesday voting to retain all the monetary policy instruments at their current levels.
Mr. Godwin Emefiele, CBN Governor chaired the meeting. The Committee thoroughly assessed the global and domestic macroeconomic and financial developments and risks to the domestic economy up to September 2016, and the outlook for the last quarter of the year.
Consequently, all 10 MPC members present out of 12 voted to:
Retain the MPR at 14.00 per cent;
Retain the CRR at 22.5 per cent;
Retain the Liquidity Ratio at 30.00 per cent; and
Retain the Asymmetric Window at +200 and -500 basis points around the MPR.
The Committee acknowledged the weak macroeconomic performance and the challenges confronting the economy, but noted that the MPC had consistently called attention to the implications of the absence of robust fiscal policy to complement monetary policy in the past.
Prior to arriving at the decisions to retain all the current monetary policy instruments, the Committee assessed the relevant risks, and concluded that the economy continues to face elevated risks on both price and output fronts.
However, given its primary mandate and considering the limitations of its instruments with respect to output, the Committee elected to retain the current stance of policy, conscious of the need to allow this and other measures like the foreign exchange market reforms to work through fully.
The communiqué issued at the end of the meeting states further that “The data available to the Committee and forecasts of key variables suggest that the outlook for inflation in the medium term appears benign.
“First, month-on-month inflation has since May 2016 turned the curve; second, harvests have started to kick-in for most agricultural produce and should contribute to dampening consumer prices in the months ahead; and third, the current stance of monetary policy is expected to continue to help lock-in expectations of inflation which, has started to improve with the gradual return of stability in the foreign exchange market.
“In this light, the MPC believes that as inflows improve, the naira exchange rate should further stabilize. “Overall, the major pressure points remain the challenges in the oil sector (production and prices), output contraction, and other financial system vulnerabilities as well as foreign exchange shortage.”