Sanusi Lamido, CBN Governor
The Central Bank of Nigeria (CBN) Tuesday raised further the Monetary Policy Rate (MPR) to 8.75 per cent from 8 per cent, representing an increase of 75 basis points.
The MPR, the benchmark interest rate at which the commercial banks borrow from the apex bank, was raised to 8 per cent from 7.5 per cent in May. It had also been increased by 100 basis points from 6.5 per cent to 7.5 percent in March.
The implication of the increase is that borrowers including manufacturers, corporate bodies and individuals will have to pay more for funds since the commercial banks will get such funds at higher rates from the apex bank.
The CBN said the MPR was raised due to uncertainty over the “dark clouds” on the international landscape and the rising spectra of structural fiscal deficit including likely increase in liquidity occasioned by the implementation of N18,000 new minimum wage for workers; the injection of funds by the Asset Management Corporation of Nigeria (AMCON) and Federal Allocation.
It also emerged Tuesday that the country’s gross external reserves stood at $33.73 billion as at July 21, 2011. That was an increase of $1.84 billion or 5.77 per cent over its June 30, 2011 level.
It also emerged Tuesday that the country’s gross external reserves stood at $33.73 billion as at July 21, 2011. That was an increase of $1.84 billion or 5.77 per cent over its June 30, 2011 level.
Addressing journalists on the outcome of a two-day meeting of the Monetary Policy Committee (MPC), CBN Governor, Mallam Sanusi Lamido Sanusi explained that the decision to further tighten monetary policy was informed by the need to take precautionary measures in the event of adverse development in the international economy.
Sanusi disclosed that the resolve to raise the MPR by 75 basis points was supported by a majority vote of eight members of the committee while one member favoured an adjustment by 50 basis points. Three other members voted for retaining the MPR at 8 per cent.
Sanusi disclosed that the resolve to raise the MPR by 75 basis points was supported by a majority vote of eight members of the committee while one member favoured an adjustment by 50 basis points. Three other members voted for retaining the MPR at 8 per cent.
Essentially, he stated that the decision to tighten monetary policy was approved by a majority of 10 to 2.Sanusi noted that MPC agreed to maintain the corridor at +/-200 basis points around the MPR. The governor who read the Communiqué No.77 of the MPC said the committee noted that inflationary pressures that were traceable to the high expenditure levels associated with the April 2011 general elections as well as the effects of rising international energy, commodity and food prices had moderated by June 2011. He tied the development partly to the tight monetary policy of the bank since September 2010.
He added that the committee however, observed that the inflation outlook remained uncertain as a result of the expected implementation of the new minimum wage policy and the imminent deregulation of petroleum prices.
“The federal government itself is not going to increase the salary bill because no civil servant in the federal civil service earns less than N18, 000. But you are going to find that across the board, as the states increase that, assuming they are able to pay, that exerts pressure on prices especially if it feeds into other sources of liquidity injection especially AMCON and FAAC,” he said.
“The federal government itself is not going to increase the salary bill because no civil servant in the federal civil service earns less than N18, 000. But you are going to find that across the board, as the states increase that, assuming they are able to pay, that exerts pressure on prices especially if it feeds into other sources of liquidity injection especially AMCON and FAAC,” he said.
Besides, Sanusi pointed out that significant injection of liquidity from FAAC in the third quarter coupled with the impact of AMCON recapitalising the intervened banks to the tune of N1.6 trillion will both add to inflationary pressure.
He said the committee okayed the favourable growth projections but cautioned that the current security challenges, infrastructural bottlenecks and uncertainty in the global economy as well as fiscal developments could undermine investors’ confidence and output growth in the short-term.
Sanusi also said the committee expressed worry over sluggish growth of credit to the private sector in the first quarter due to the heightened credit risk in the real economy as a result of persistent structural problems caused by inadequate power supply and critical infrastructure deficit.
He added: “The Committee noted the modest accretion to external reserves in recent months but remained concerned about the sustained low level of accretion in the face of higher oil output, higher oil exports and higher oil prices... given that the current oil price level may not be sustained in the event of a slowdown in global economic recovery, the Committee reiterated the need for pursuing policies to foster macro-economic stability, economic diversification as well as encouraging foreign capital inflows.”
It however, commended the CBN for the limit placed on the foreign exchange sales to the BDCs
It however, commended the CBN for the limit placed on the foreign exchange sales to the BDCs
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