Despite resilience, banks still affected by weak macroeconomic environment – MPC members

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Stories by Ayobami Adedinni

In spite of the banking sub-sector’s resilience, the weak macro-economic environment  has  continued   to   impact   negatively   on   the   stability   of   the   sub-sector, members of the Monetary Policy Committee, (MPC) of the Central Bank Of Nigeria,(CBN) have said.

Speaking at the end of its Monetary Policy Committee (MPC) Meeting in September, the  Committee reiterated its call on the CBN to sustain its surveillance of deposit  money  banks  (DMBs)  activities  for  t he  purpose  of  prompt  identification  and  mitigation of potential vulnerabilities.

The Committee also called on the DMBs to support the quest to move the economy forward by extending reasonably low priced credit to the private sector.

In a communiqué signed by the CBN governor Mr Godwin Emefiele, the committee said tightening of the rates might result  in  the  deposit  money  banks  repricing  their  assets  and  loans,  thus  raising  the  cost  of  borrowing  and  therefore  heightening  the  already  weak  investment  climate and non-performing loans.

With  respect  to  loosening,  the  Committee  said it believes  that  although  while  it  would  make  it  more  attractive  for  Nigerians  to  acquire  assets  at  cheaper  prices,  thus  increasing  their  net  wealth,  and  therefore  stimulate  spending  as  confidence  rises,  it  nevertheless,  felt  constrained  that  loosening  at  this  time  would exacerbate  inflationary  pressures and worsen  the  exchange  rate  and  inflationary  conditions.

It said “The Committee also  felt  that  loosening  will further pull  the real rate deeper into negative territory as  the gap between the nominal  interest rate and inflation widens.

“On  the  argument  to  hold,  the  Committee  believed  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.

“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 Committee  welcomed the steady  implementation of the 2017 Budget, especially, the capital component of the  budget,  and  urged  increased  momentum  in  expenditure  directed  at  the growth stimulating   sectors   of   the   economy   in   order   to   reduce   youth  unemployment and restiveness.

Regarding the tepid  turnaround   in   economic   activities   in   the   second   quarter   of   2017,   the  Committee  emphasized  that  the  employment  gains  of  recovery  were still minimal,  noting  that  a  number  of  important  job  elastic  sub-sectors  were  still weak and may require more fiscal support to regain traction.

In his view, Balami Dahiru Hassan said unemployment is an important area that requires sound policies both from the monetary and fiscal authorities, to reduce the level of unemployment, which would help spur growth in the economy.

The CBN has a responsibility to assist in reversing the situation through putting in policies that would facilitate or support economic growth.

In his words, “What can  we  do to increase employment and livelihood among the youths?

“As  monetary  authorities,  there  is  need  to  intervene  in  the  various  sectors  of  the  economy  that  have  a  high  propensity  of  employment  generation  such as: agriculture, small and medium scale entrepreneurship, establishing Silicon  Valley  centres  etc.

“Credits  should  also  be  extended  to  those  who  have  participated  in  the various  centres  for  entrepreneurship  development,  in  the  country.  This  should  be  in  the  form  of  seed  money.

“The  largest  employer  of  labour  in  Nigeria  is  in  the  private  sector,  and  as  such,  should  be  supported.  The  government  should  provide  an  environment  for  the  private  sector  to  thrive,  so  as  to  create  job  opportunities.

” It  is  true  that  graduates  do not  see themselves  going  to  the  farm,  and  as  such,  the  private  sector  should  be  supported to provide employment for our teeming graduates,” he stated.

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