The Central Bank Of Nigeria CBN left its benchmark interest rate unchanged at 14% citing challenges weighing down the domestic economy and uncertainties in the global environment.
The Monetary Policy Committee at the end of the second quarter 2017 meeting, yesterday, held the key policy rate at 14 percent, Central Bank of Nigeria Governor Godwin Emefiele told reporters in the capital, Abuja.
According to Emefiele:
“In consideration of the challenges weighing down the domestic economy and the uncertainties in the global environment, the Committee decided by a unanimous vote of the eight members in attendance to retain the MPR at 14.0 per cent alongside all other policy parameters. One member was absent at the meeting. In summary, the MPC decided to: Retain the MPR at 14 per cent; Retain the CRR at 22.5 per cent; Retain the Liquidity Ratio at 30.00 per cent; and Retain the Asymmetric corridor at +200 and -500 basis points around the MPR.”
On the budget, Emefiele said:
“The Committee urged the fiscal authorities to expeditiously commence the implementation of the recently approved 2017 budget, especially, the capital expenditure portion, to sustain the momentum of recovery, engender employment and restore confidence in the Nigerian economy. The Committee expects that the timely implementation of this plan, judicious execution of the approved 2017 Budget and sustenance of the new foreign exchange implementation regime supported by the restoration of security in different parts of the country, especially, in the Niger Delta region, would help accelerate growth and restore confidence in the economy.”
On Nigeria excessive borrowing, Emefiele said:
“The Committee was concerned that credit to government continued to outpace the programmed target of 33.12 per cent for fiscal 2017, while credit to the private sector declined considerably far below the programmed target of 14.88 per cent.”
The National Bureau of Statistics, NBS, also stated that the nation’s economy contracted for the fifth consecutive quarter, as the real Gross Domestic Products, GDP, declined by 0.52 per cent in the first quarter of 2017.
“In the first quarter of 2017, the nation’s Gross Domestic Product, GDP, contracted by -0.52 per cent (year-on-year) in real terms, representing the fifth consecutive quarter of contraction since Q1 2016. This is 0.15 per cent higher than the rate recorded in the corresponding quarter of 2016 (revised to -0.67 per cent from -0.36 per cent) higher by 1.21 per cent points from rate recorded in the preceding quarter, (revised to -1.73 per cent from -1.30 per cent). Quarter-on-quarter, real GDP growth was 12.92 per cent. During the quarter, aggregate GDP stood at N26.03 trillion in nominal terms, compared to N22.24 trillion in Q1 2016, resulting in a nominal GDP growth of 17.06 per cent.”
While inflation in Africa’s most-populous nation slowed for the first time in 16 months to 17.8 percent in February, it still exceeds the target range of 6 percent to 9 percent. Consumer prices surged after the central bank removed a 197-199 peg against the dollar in June, causing the naira to lose more than 40 percent of its value, and as a shortage of foreign currency made the import of everything from gasoline to food more expensive.
While the government’s plan proposes allowing a market-determined exchange rate, Emefiele said in a March 11 speech a free floating currency would increase the inflation rate and hurt the economy. The central bank has regularly sold dollars to keep the naira between 305 and 320 against the greenback over the past four months. Foreign-currency sales have helped the naira gain slightly on the black market to about 440 per dollar compared with a record-low of 520 last month.
The government said increased production of oil, Nigeria’s biggest export, will help to stabilize the foreign-exchange rate and provide more funds needed to stimulate the economy after it shrank by 1.5 percent last year, the first contraction since 1991. The government aims to boost output to 2.2 million barrels a day this year from an almost three-decade low of 1.6 million barrels a day in the third quarter of 2016 when disgruntled militants blew up several pipelines in the Niger River delta.
S&P Global Ratings spared Nigeria a downgrade and affirmed its B assessment, five levels below investment grade, with a stable outlook on March 17. The rating company said increased oil output and capital expenditure by the government will help the economy expand by an average of 3.4 percent annually through 2020. The government earlier this month released an economic blueprint to boost growth to 7 percent, create 15 million jobs and reduce the inflation rate to less than 10 percent by 2020.