The Nation Newspaper

Tag: Monetary Policy Committee (MPC)

MPC predicts fragile but promising economic growth

…urges Govt to freeze growth in FAAC distribution to create savings

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has predicted a fragile economic growth for the nation in 2018.

To achieve this fragile but promising growth, the Committee urged “the Government to initiate strong stabilization programmes and to freeze the growth in its aggregate expenditure and Federation Account Allocation Committee (FAAC) distributions in order to create savings; needed to stabilize the economy against future oil price related shocks.”

The Monetary Policy Committee lamented that it has “observed increasing monetization of oil proceeds as evident in the growing FAAC distribution, relative to the 2017 level of disbursements.

Addressing journalists at the end of the first MPC meeting for the year which also saw in attendance the new Deputy Governors and members of the MPC recently cleared by the Senate in Abuja, CBN Governor, Mr Godwin Emefiele noted that “forecasts of key macroeconomic indicators give a positive outlook for the Nigerian economy in 2018.”

This he said “is predicated on the quick passage and effective implementation of the 2018 budget, improved security, foreign exchange market stability as well as favourable crude oil prices.”

However on the downside, the Committee Emefiele said “noted the potential impact of the 2019 election- related spending, against the weak backdrop of tax revenue efforts, herdsmen related violence and rising yields in the advanced economies. Indications in the US and the UK point to higher interest rates in the short to medium term.”

The Committee he said noted with satisfaction “the gradual return to macroeconomic stability as reflected in the third consecutive quarterly growth in real GDP in the fourth quarter of 2017. It also noted the continued moderation in all measures of inflation as well as sustained stability in the naira exchange rate and urged the CBN to sustain the stability to avoid a mission drift.”

Overall, the MPC noted that the recovery of the economy was strengthening, in view of the return to growth of the Services Sector.

With regards to the fiscal side, Emefiele praised the fiscal sector for continuing to settle its outstanding liabilities, reducing its domestic debt profile, thus increasing the liquidity of the banking system.

The Committee noted that at 14 per cent, the policy rate was tight enough to rein-in current inflationary pressures. The Committee, therefore, reaffirmed its commitment to price stability conducive to sustainable and inclusive growth.

Members of the MPC were happy TA what they described as the “relatively strong balance sheets of the deposit money banks’ and the stable outlook. This is in spite of the concentration of non-performing loans in a few sectors, which the Committee observed was satisfactorily being addressed by adequate mechanisms established by the CBN to address the phenomenon.”

The MPC also noted that as Government pays off its huge contractor debts, a sizeable portion of these non-performing loans will be addressed. The Committee “urged the CBN to strengthen its supervisory oversight and early warning systems to promptly identify, monitor compliance with extant prudential regulations, sustain macro-prudential policy and manage emerging vulnerabilities in the banking system.”

The MPC then reiterated the CBN’s “commitment to delivery of low interest credit as evidenced in its bold steps to adopt unconventional monetary policy to aid credit flow to vulnerable and growth enhancing sectors of the Nigerian economy.”

The MPC then enjoined the CBN “to continue to support and encourage credit delivery at single digit interest rate through other mechanisms in the interim, while encouraging the banking system to establish frameworks to increase credit delivery to the employment generating sectors of the economy.”

At the end of the meeting, the Committee decided unanimously by a vote of all members present to retain the Monetary Policy Rate (MPR) at 14.0 per cent alongside all other policy parameters.

Consequently, the MPC voted unanimously to retain the MPR at 14.0 per cent; Cash Reserve Ratio (CRR) at 22.5 per cent; Liquidity Ratio at 30.0 per cent; and Asymmetric corridor at +200 and -500 basis points around the MPR.

Before answering questions from journalists the CBN governor thanked President Muhammadu Buhari and the National Assembly for appointing and clearing two Deputy Governors and other MPC members.

Emefiele said the new MPC members were subjected to rigorous induction processes stressing that “they are very qualified individuals with no preconceived notion as to what expect or demand of the committee but individuals who are given data to analyze and make objective decisions in the nation’s interest.”

Read Also: MPC to consolidate forex, inflation gains

April 4, 2018
Senate screens CBN, MPC nominees

The Senate Monday screened President Muhammadu Buhari’s two nominees for the position of Deputy Governor of the Central Bank of Nigeria (CBN).

The nominees are Mrs. Aisha Ahmad and Mr. Edward Adamu.

Similarly, four other nominees were also screened as members of the Monetary Policy Committee (MPC). They are Prof Festus Adeola Adenikinju, Dr. Aliyu Rafindadi Sanusi, Dr. Robert Chikwendu Asogwa and Dr. Asheikh Maidugu.

The nominees took turns to face the Senate committee on Banking, Insurance and other Financial Institutions, as members of the committee threw a barrage of questions at them.

Mrs. Ahmad who was accompanied to the venue of the screening by her husband and her father, was the first to be screened. In response to questions, the nominee stressed the need for the country to have a stable foreign exchange policy in order to stabilise the economy.

On his part, Edward Adamu, who is widely acknowledged to have been appointed on merit, based on his track record at the apex bank, was not subjected to the grill. Members of the Senate committee were unanimous in giving him a smooth passage.

Earlier moves, allegedly by some Presidency cabal to replace Adamu with a preferred candidate were vehemently resisted by his colleagues at the CBN who vowed to frustrate such manipulation.

The Senate had put on hold the screening of the nominees and others appointed by President Muhammadu Buahri for several weeks, owing to disagreement between the two arms of government.

At the commencement of the exercise, the Senior Special Assistant to the President on National Assembly matters (Senate), Ita Enang, pleaded with the lawmakers to also screen other nominees of the President whose nomination are still pending.

Chairman of the Senate committee, Senator Rafiu Ibrahim, however said the leadership of the Senate decided to yield ground owing to the strategic and sensitive nature of the nominees’ appointments.

Read Also: http://staging.thenationonlineng.net/senate-makes-u-turn-buharis-nominees/

March 19, 2018
CBN denies overfunding Federal Government
- warns that changing interest rate might reverse economic gains
The Central Bank of Nigeria (CBN) has denied claims that it is overfunding the federal government.

Reacting to a report that a member of the Monetary Policy Committee (MPC) had raised alarm that the apex bank was overfunding the federal government, CBN governor Godwin Emefiele defended the Bank by stating categorically that “the CBN has not overfunded the federal government.”

Addressing journalists at the end of the bi-monthly Monetary Policy Committee (MPC) meeting in Abuja Tuesday, Emefiele stated that “the federal government, on its own decided that all its funds that are in banks in both local and foreign currency should be moved to the CBN into the Treasury Single Account (TSA) like we all know.”

Putting the issue into perspective, the CBN governor explained that “if as the customer of a bank you have fixed deposit in an account and for some reasons you want some spontaneous financing to meet your obligation, your own commercial bank can be approached and asked to allow the customer overdraw his account temporarily, your bank will oblige you. This has nothing to do with the Central bank or any bank but the assurance I would like to give to you is that there is no truth in the initial story of overfunding because whatever is overdrawn is much less than what the federal government also has it CF account.”

Emefiele stressed that “at a time when the world racked by shocks that has resulted in certain vulnerabilities in the global economy that most central banks whether they like it or not, do not have a choice but to come to the aid of their governments particularly when you consider what is size of the central bank balance sheet relative to the GDP.”

In Nigeria, the size of the CBN balance sheet relative to the GDP, the governor said “is just about 23% but I will give you the data of other central banks. The People’s bank of China the size of its balance sheet relative to GDP is 49%, in the Euro zone it is 27%, the Swiss central bank is 95%, the bank of Taiwan is 98% the bank of Japan is 104% the Bank of England is 22% and the US Fed is 28%.”

“So if that of CBN is 23% of balance sheet, I think it does not calls for cause for concern or worry for anybody to begin to come to a conclusion the way the personal statement of an MPC member is not understood.”

At the end of the meeting, MPC voted to retain the Monetary Policy Rate (MPR) or interest rate at 14.0 per cent; retain the Cash Reserve Ratio (CRR) at 22.5 per cent; retain the Liquidity Ratio at 30.0 per cent; and retain the Asymmetric corridor at +200 and -500 basis points around the MPR.

On the argument to hold rates at 14% for so long, the Committee Emefiele said “believes that the effects of fiscal policy actions towards stimulating the economy have begun to manifest as evident in the exit of the economy from the fifteen-month recession.”

He noted that “although still fragile, the fragility of the growth makes it imperative to allow more time to make appropriate complementary policy decisions to strengthen the recovery. Secondly, the Committee was of the view that economic activity would become clearer between now and the first quarter of 2018, when growth is expected to have sufficiently strengthened and gains in receding inflation, very obvious.”

The most compelling argument for holding interest rate at 14% he maintained “was to achieve more clarity in the evolution of key macroeconomic indicators including budget implementation, economic recovery, exchange rate, inflation and employment generation.”

When asked to explain what will warrant a change of interest rate, Emefiele stated that “monetary policy authorities in a year if they must change their stance will not do it for more than maybe once or twice so there is nothing wrong or extraordinary in the MPC holding position constant for a considerable length of time.”

In retaining the MPR at 14% the CBN governor noted that “we started 15 months ago at a point where growth was decelerating, inflation had doubled from 9% to 18% in January 2016 to January 2017 we saw the risks in foreign exchange markets and the massive depreciation that happened in the foreign exchange market at a point the market was at about N525 to the dollar.”

But by virtue of the fact that we decided and said that look we should hold position because at the point we decided to hold position we had taken some tight monetary policy stance we began to see that growth had started to improve all be it fragile at 0.55%, inflation is moderating, although slowly to where it is now from about 18.7% or so in January to 16.0% now, we’ve seen exchange rate appreciate from N525 in February to N360 in at this time, what that means is that certain correct decisions had been taken and that there is a need for us to see to have how far we will see to the positive effects of those decisions.”

He assured Nigerians that the MPC “recognize that there is a need to deal with the issue of interest rate and we are very conscious of the need to bring down interest rates but we think we are not there yet because if we reverse the trend or if we do what most people expect, the truth is that it may reverse the gains we have so far achieved in exchange stability and moderation of inflation. That’s why we decided to wait and see how far we go in these areas.”

Speaking on the Nigeria Autonomous Foreign Exchange (NAFEX) segments, Emefiele stated that the forex segment “has far exceeded our expectations and we are delighted that over $7 billion has come in in five months.”

“It gratifies us that confidence level is building and all we have to do is work on areas where there are still a few grey issues that needed to be addressed and they would be addressed to ensure that there’s maximum confidence that will engender further inflow of funds into the market to support imports and the growth of the economy.”

The CBN governor stated that “available data and forecast of key macroeconomic variables indicate a relatively positive outlook, predicated on existing policy initiatives including the Economic Recovery and Growth Plan (ERGP). Other potential drivers of economic recovery are; the expected increase in government revenue arising from favourable crude oil prices, stable output, and general improvements in the non-oil sector, especially, agriculture, industry and construction.”

The intervention by the CBN in the real sector he said “is expected to continue to yield positive results in terms of output and lower consumer prices.”

The MPC, however, noted some downside risks to the overall short- to medium-term positive outlook for the economy. These include; flooding which displaced farming communities and political agitations. On the external front, the hawkish policy stance in the United States, rising geo-political tensions and sluggish output recovery in the Euro-area and Japan, could slow-down the momentum of global output growth, with significant spillovers to emerging markets and developing countries, including Nigeria.
September 26, 2017
CBN optimistic of rates convergence at FOREX market– Emefiele

Mr Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN) says the apex bank is determined to see the convergence of rates at the foreign exchange market.

Emefiele said this while fielding questions from newsmen at the end of the Monetary Policy Committee (MPC) meeting of the CBN in Abuja on Tuesday.

The CBN governor denied insinuations in some quarters that it was directed by the National Executive Council (NEC) to intervene at the FOREX market before it started injecting money into the interbank market.

“NEC did not direct the CBN as is being insinuated in some quarters.

“We have seen the trend and we took decision to revise it through our FOREX intervention,’’ Emefiele said.

The governor said that the CBN was optimistic that the rate between the official and parallel market would converge further.

When asked if the CBN could sustain the policy, Emefiele said that the bank had the capacity to take decisions and implement them.

He noted that the nations’ foreign reserves had improved further to 31 billion dollars.

The News Agency of Nigeria (NAN) reports that the MPC rose from its meeting with a retention in the Monetary Policy Ratio (MPR), Cash Reserve Ratio (CRR) at 22.5 per cent and liquidity ratio at 30 per cent.

Since February when the CBN started its intervention at the interbank market, it had injected more than 1.5 billion dollars, and the Naira had extended its gains against the dollar.

To further sustain its intervention at the market, the apex bank injected another 180 million dollars on Monday to meet the needs of schools, medicals, business and personal travel allowances.

NAN reports that in January, the Association of Bureau De Change Operators of Nigeria (ABCON) appealed to the CBN to ensure rate convergence as well as eliminate the multiplicity of rates in the market.

Meanwhile, the Naira had continued to appreciate at the parallel market, exchanging at N420 (buying rate) and N430 (selling) on Tuesday afternoon.

The Pound Sterling and the Euro closed at N530 and N450 respectively.

March 21, 2017
Recession: CBN advises FG to settle domestic debts

…Retains Monetary policy indices

After resolving to retain all key monetary policy indices, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has urged the federal government to settle its domestic debts.

Addressing journalists at the end of the meeting in Abuja Tuesday, the CBN governor Mr. Godwin Emefiele called on 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 he said “have slowed business activities of economic agents; most of who are indebted to the banking system, thus compromising the integrity of the financial system.”

Members of the MPC also advised the CBN “to commit to greater surveillance and deployment of early warning systems in managing the banking system.”

Before arriving at the decision to retain interest rate and corresponding indices, Emefiele stated that “available data and forecasts of key economic variables indicate that the outlook for growth and inflation in the medium term continues to be challenging. Growth is expected to remain less robust given the absence of sufficient fiscal space while the current tight stance of monetary policy and improved agricultural harvests are expected to contain further price increases and moderate price expectations.”

The Committee he said assessed the relevant risks to the global and domestic economy and “concluded that the risks to the economy remained highly elevated on two fronts (price and output).”

However, considering the importance of price stability, and being mindful of the limitations of monetary policy in influencing output and employment under conditions of stagflation, the Committee he said “decided unanimously in favour of retaining the current stance of monetary policy, thus keeping the MPR at 14.0 per cent alongside all other policy parameters which include retaining the Cash Reserve Ratio (CRR) at 22.5 per cent; retaining the Liquidity Ratio at 30.00 per cent; and retaining the Asymmetric Window at +200 and -500 basis points around the MPR.

Asked to comment on the allegations that the CBN was planning to jail holders of foreign currency and confiscating the currencies, Emefiele said those allegations are untrue.

According to him, “there is nothing in our forex regulations that says that people will be jailed or that their dollars will be confiscated. But am aware, just today, that the Nigerian Law Reform Commission is looking at reviewing the exchange regulations just like they normally will from time to time.”

The Law Reform Commission he said is an agency of government “that has responsibilities for reviewing all laws in the country from time to time depending on the exigencies of the time. We have not been contacted regarding whether or not some of the clauses that are involved will be reviewed, but am saying here categorically that if we are contacted or whenever it becomes an issue for discussion, we will suggest and advise against the clause that forbids people from keeping their dollars if they choose to or a law that says that people should be jailed for keeping foreign currency.”

On the deployment of security agencies to suspected currency black market locations, the CBN governor stated that “the forex regulation in Nigeria today forbids trafficking in currency on the streets. The security agencies have a right to enforce the laws and as the law says you cannot traffic currency o the streets, you’re supposed to be in your office conducting your business. You will have to adhere to that and if you don’t adhere to that, the security agencies will arrest you. Whether it would drive black marketers underground, they are illegal, we don’t consider people who want to go underground to conduct illegitimate businesses.”

At the meeting earlier, Emefiele said “the MPC believes that the Security agencies should sustain their checks on the activities of illegal foreign exchange operators in order to bring sanity to that segment of the market. 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.”

Emefiele also responded to enquiries of a possible reduction in the number of Bureau De Changes (BDCs) saying that “we believe that everybody is entitled ones regulations are set, we don’t need to preclude anybody who meets the conditions, but of course naturally the regulator has a right to put in place policies that limit entry. If we want to limit entry, we know what to do and I can assure you that we will do it at any point we decide to limit entry or even exacerbate exit from the market, that’s something we would look at at the appropriate time.”

The CBN governor was asked to speaking to the level of risk Nigerian banks were in currently and he said that “as a result of current challenges being faced by the global economy, all agents in the financial system including banks and other players are facing tremendous risks.”

He added that “normally in any economy where there is a slowdown and recession naturally financial institutions particularly banks will face certain risks risks of NPL rising and different other risks, what that does is that it imposes on the regulators a great challenge to ensure that it strengthens its prudential guidelines to ensure that the banks and particularly depositors are protected.”

Nigerian banks like other banks in other climes he said “are facing risks but those risks are surmountable and the CBN is doing its best to ensure that those risks don’t crystallize to a point where we begin to talk about depositors risking their deposits, so for that reason, the risks is overtly elevated. These are risks being faced by any banking system or any financial system in any clime today arising from the global challenges.”

On efforts to stimulate the economy, Emefiele said “the CBN has from time to time played its role in putting in place measures that are meant to intervene and stimulate the economy. The CBN is involved in various types of interventions in line with the enabling act that asked it to conduct development finance activities to channel funds at low interest rates to benefit the economy and people.”

November 22, 2016
CBN retains 12% interest rates

The Central Bank of Nigeria (CBN) has once again pegged the interest rates at 12 per cent.

Addressing journalists after the Monetary Policy Committee (MPC) meeting in Abuja on Tuesday, the CBN governor, Mallam Sanusi Lamido Sanusi, disclosed that the MPC decided to hold the Monetary Policy Rate (MPR) at 12 per cent and maintain the symmetric corridors round MPR at +\- 200 basis points.

A new twist was introduced at the last MPC meeting when the CBN governor disclosed that the committee has also decided to retain the Cash Reserve Ratio (CRR) at 12 per cent for private sector deposit and introduce 50 per cent CRR for public sector deposits.

Speaking on what informed the apex bank’s decisions, Sanusi stated that “at the time when government is borrowing more and saving less you don’t expect monetary authorities to lower interest rates.”

He said two concerns informed the MPC’s decision.

July 23, 2013