CBN blames delayed budget for retaining MPR at 14%

May 22nd, 2018

By Chika Otuchikere

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday, voted to retain the Monetary Policy Rate (MPR) at 14 percent alongside all other monetary parameters.

The Cash Reserve Ratio (CRR) was left at 22.5 percent, the Liquidity Ratio at 30 percent, while the asymmetric corridor was left at +200 to 500 basis points.

According to the CBN Governor, Mr. Godwin Emefiele, who presided over the two-day meeting, the MPC had left the rates unchanged for several reasons including the non-passage of the 2018 budget.

The legislature last week approved 2018 spending plans which is still awaiting the signature of President Muhammadu Buhari. The budget is more than 20 percent bigger than last year’s, aimed at boosting economic growth.

Emefiele however noted that the increase in expenditure before the 2019 elections “will eventually lead to inflationary tendencies and may reverse the course of inflation upwards and also put pressures on the foreign exchange market”.

Nine members of the Monetary Policy Committee attended the meeting. Eight voted to leave the benchmark rate unchanged, with only one dissenting voice, Emefiele told reporters.

The CBN boss further disclosed that the apex bank was working on a policy that would penalize banks with excess liquidity in a bid to encourage lending to the real sector. He noted that other reasons why the rates were unchanged was, rising trend of inflation in global markets, expected liquidity inflow in the 2nd half of the year and pre-election spending.

He also disclosed that the bank was putting finishing touches to the framework for the China swap deal. He said Standard Chartered Bank and Stanbic IBTC (which has the Industrial and Commercial Bank of China as affiliate) have been chosen as settlement banks.

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