…As MPC Reduces CRR To 25%, Retains MPR At 13%
The Central Bank of Nigeria (CBN) has said that it is unaware of any memorandum exempting any institution from the Treasury Single Account (TSA), calling on all affected organizations to comply with the directive of moving their money to the central bank immediately.
The Central Bank Governor Godwin Emefiele making this known on Tuesday at a briefing on the outcome of the Monetary Policy Committee (MPC) meeting of September said the Cash Reserve Requirement (CRR) reduced from 31 percent to 25 percent but the Monetary Policy Rate (MPR) was retained at 13 percent and Liquidity ratio also retained at 30 percent.
According to him; “In consideration of the underlying fundamentals of the economy, particularly the declining output growth, rising unemployment, evolving international economic environment as well as the need to properly position the economy on a sustainable growth path, the MPC decided by a vote of 7 to reduce the Cash Reserve Requirement (CRR) from 31 per cent to 25 per cent while 3 voted to hold. By a unanimous vote, the MPC voted to retain the MPR at 13 per cent”.
He said that the average naira exchange rate remained relatively stable at the inter-bank segment which opened at N196.95/US$ and closed at N197.00, at a daily average of N196.98/US$ between June 29 and September 18, 2015 representing a depreciation of N0.5K for the period, but significantly volatile in the Bureau De Change segment which opened at N224.50/US$ and closed at N211.50, adding however that the Committee reiterated its unwavering commitment to naira exchange rate stability despite the pressures.
He however noted that this represented an appreciation of N13.00k for the period, adding also that the relative stability in the inter-bank market and improvement in the BDC segment were attributed to the effects of various administrative and policy measures.
He said “The Committee noted that growth had come under severe strains arising from declining private and public expenditures. In particular, it noted the impact of non-payment of salaries at the state and local government levels as a key dampening factor on consumer demand. Year-on-year headline inflation continued to trend upwards, although the month-on-month measure moderated. Demand pressure in the foreign exchange market remained significant as oil prices continued to decline.
“Global inflation is expected to remain tepid as the recent temporary rebound in oil prices and stronger consumer sentiments have mildly raised consumer prices in the advanced economies. Consumer price developments were mixed in emerging and developing economies. Commodity importing economies have continued to benefit from low global oil and other commodity prices, while others, especially exporters of primary commodities, are contending with increased pressure on their currencies and fiscal position; and in some cases, significant inflation pass-through to domestic prices.
Emefiele added that the Committee, while reiterating its commitment to price stability, noted that the rising inflationary trend was a concern given the already tight monetary policy stance of the Bank, noting that the non-oil sector remained the main driver of growth in the second quarter of 2015, at 3.46 per cent.
According to him; “Real GDP growth is projected by the National Bureau of Statistics (NBS) to stabilize at 2.63 per cent in 2015, compared with the 6.22per cent recorded in 2014. The key drivers were services, trade and agriculture, contributing 1.80, 0.95 and 0.82 percentage points, respectively. On the other hand, Oil and Natural Gas sector declined by 0.73 percentage point an improvement of 1.13 percentage points relative to the first quarter of 2015.
“The overall outlook for economic activity is expected to improve on account of sustained improvement in the supply of power and refined petroleum products and progress with counter-insurgency in the North East axis. The Committee reiterated its commitment to efforts in support of the various ongoing Federal Government initiatives to stimulate output growth.
“The MPC also observed that despite the TSA, banking system liquidity ratio remained moderate. Consequently, the Committee advised on the urgent imperative of banks to aggressively support the efforts of government at job creation by channeling available liquidity into target growth enhancing sectors of the economy such as agriculture and manufacturing. This is with a view to promoting employment creation through conscious efforts aimed at directing lending to the growth enhancing sectors of the economy".
While attributing the growth in aggregate credit mainly to growth in Federal Government borrowing which reached 140.13 per cent in August 2015 or 210.19 per cent when annualized, he noted that the Net domestic credit (NDC) rose by 11.00 per cent, which annualizes to 16.49 per cent in the same period, adding also that at that level, NDC was within the provisional benchmark of 29.30 per cent for 2015.
Emefiele also noted that the committee considered that the Bank and deposit money banks, must strive to reverse the slowing GDP trajectory by actively stepping up their efforts in catalyzing the economy with substantial new loans to the target, adding that sectors such as agriculture and MSMEs were sectors for rapid generation of productive employment and wealth creation, and must therefore, be painstakingly encouraged.
He further said “Mindful of the possibility of diversion of any extra liquidity to the foreign exchange market, the Committee urged the Bank to closely monitor the nature and sources of demand pressure in the foreign exchange market to ensure that funds were not diverted to demand for foreign exchange but applied to specific growth enhancing asset creation lending by banks.
“The Committee noted the bearish trend in the equities segment of the capital market during the review period. The All-Share Index (ASI) decreased by 9.3 per cent from 33,456.83 on June 01, 2015 to 30,332.68 on September 18, 2015. Similarly, Market Capitalization (MC) fell by 8.8 per cent from N11.42 trillion to N10.42 trillion during the same period”.
The CBN Governor further said that the committee having seen two consecutive quarters of slow growth recognized that the economy could slip into recession in 2016 if proactive steps were not taken to revive growth in key sectors of the economy.
-Gift Olivia Samuel
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