MPC maintains status quo on rates


By Kayode Tokede

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday retained Monetary Policy Rate (MPR) at 13.5 per cent and held other policy parameters constant.

The CBN Governor, Mr. Godwin Emefiele on Tuesday at the MPC stated that the committee also decided to retain Asymmetric Corridors of +200 -500 bp around the MPR as well as retained Cash Reserve Ratio (CRR) at 27.5 per cent and Liquidity Ratio at 30 per cent.

He explained that after weighing the options of tightening, loosening or to hold, the committee while taking the decision took cognisant of the need to address unfolding and unfavorable micro economic development.

He said these were reigning inflation, need to support growth and employment through the extant intervention and recent initiative to support external reserves and creation.

He added that in taking the decision, the committee noted the fact that the CRR was increased at the last MPC meeting.

He said time was required for its full effect to be manifested pointing out that increasing the MPR would contradict the recent reduction in the interest rates of CBN intervention programmes from nine to five per cent.

“Besides an increased in MPR, will be taken by Deposit Money Banks (DMBs) as an invitation to increase lending rate and this will be most undesirable at this point in time when efforts are being made to avert a recession.

“Another reason is that a reduction in MPR will not make DMBs to reduce lending rate but other CBN strategies are making DMBs to reduce the lending rates in furtherance of the growth objective,” he said.

Emefiele said the MPC also noted continued rising in domestic prices, low oil prices in the wake of oil global shock, exchange rate pressure and other domestic and fiscal responses in the revolving crisis.

He stated that in view of these, the committee unanimously voted to retain MPR and hold other policy parameters constant.

Committee urged federal government to leverage on Public Private Partnership (PPP) to intensify investment in infrastructure to increase output and employment.

Emefiele said the committee noted that this was necessary owing to the persistence of inflationary pressures attributed to a combination of monetary and structural factors.

He said the MPC cited the potentials for Foreign Direct Investments (FDIs) flows to the Nigerian auto manufacturing, aviation and rail industries, which could take advantage of these viable and untapped domestic and regional markets.


Emefiele said the Committee,  however, noted the sustained improvement in the financial soundness indicators and applauded the continued decline in the ratio of non-performing loans, growth in assets of the banking system and profitability of the industry in the light of increasing global uncertainties.

He stated that the MPC also recognised the success of the Bank’s loan-to-deposit ratio policy and its potential to alleviate production shortfalls, reduce unemployment and boost aggregate demand.

According to him, the committee urged the Bank to pursue this and other related policies to a conclusive end.

Meanwhile, the governor disclosed that the MPC underscored the COVID-19 pandemic as a public health crisis which would continue to undermine any monetary or fiscal stimulus unless appropriate measures were taken to trace, test, isolate and treat infected persons in order to curtail the spread.

He said the committee enjoined government to ensure that migration across the country was significantly reduced.

Emefiele said the MPC also called on the Federal Government to take necessary steps to safeguard the population through close monitoring and emergency readiness measures to identify and care for infected persons in the country.

He added that the safety measures should include compulsory restriction of movement to curtail spread of the pandemic.

“The Committee noted the weakened revenue position of the Federal Government arising from the sharp drop in oil prices.

“It reiterated the need for government to urgently reduce reliance on oil revenue by gradually diversifying the economy and improving tax collection.

“To this end, the MPC noted the speedy response of the Federal Government to the oil price shock by the revision of the 2020 budget downwards by N1.5 trillion and the oil price benchmark to 30 dollars per barrel.

“The MPC urged the National Assembly to fully cooperate with the Federal Government in coming up with a budget that reflects our new realities.

“In addition, the Committee noted the introduction of price modulation measures resulting in reduction in the pump price of PMS from N145 to N125 per litre.

“Emefiele said the Committee also noted its contributory effect in boosting aggregate demand, lowering inflation and improving the welfare of ordinary Nigerians,” he said.


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