The Central Bank of Nigeria (CBN) on Tuesday retained the monetary policy rate at 12 per cent, the CBN Governor, Malam Sanusi Lamido Sanusi, said. Sanusi disclosed this while briefing newsmen on the outcome of the Monetary Policy Committee (MPC) meeting, in Abuja. Stating the reasons why the committee kept the rate at 12 per cent Sanusi said “The committee noted that the actions taken at the last MPC have served the purpose of helping the naira avoid the fate of other developing countries’ currencies by keeping it a little bit stable. Finally, with the Federal Open Market Committee (FOMC) decision not to begin tapering asset purchases immediately, and the improved outlook for financial stability in Europe after the German elections, the risks of currency instability are significantly reduced.
“The monetary stance maintained by the U.S. Federal Reserve is positive for international oil prices and portfolio flows. In consideration of all these issues, the committee decided by a vote of 11 members to hold the MPR at 12 per cent. One member voted for a reduction in the MPR by 50 basis points.“
According to him, 11 members voted to retain the symmetric corridor of 200 basis points around the MPR while one member voted for an asymmetric corridor of 200 basis points above the MPR and 400 basis points below the MPR. The governor noted that all members voted to retain the 50.0 per cent Cash Reserve Requirement (CRR) on public sector funds and 12.0 per cent CRR on private sector deposits.
On the stability of naira, he said that the committee was satisfied with the positive developments in the economy, especially the moderation in inflation, stability in the financial system and currency markets. He noted the strong growth forecast by the National Bureau of Statistics for third quarter and fourth quarter on the back of relatively slow growth in the second quarter. He added that the committee observed that the actions taken by the Bank since the last MPC yielded their intended effects on stabilising the exchange rate while maintaining inflation within its target range. He added that in more than 30 countries surveyed, the Naira exchange rate remained one of the most stable having depreciated by only 2.3 per cent compared with the massive depreciation in the value of other currencies. He named the currencies to include the Indian Rupee, the Indonesian Rupiah, the Brazilian Real, the South African Rand and the Ghanaian Cedi.
“The clarifications provided by the federal reserve over its third round of Quantitative Easing (QE3) policy brought substantial relief to the financial markets globally and initiated a reversal of the trend in capital outflows from the country. However, the committee noted the existence of strong foreign exchange demand pressures coming domestically and which are not necessarily linked to an increase in the import of goods. This non-import-related demand was attributed to the buildup in political activities in the country and increasing resort to dollarisation of the economy by the political class.“
Sanusi noted that the Committee charged the banks to ensure the stability of the currency in the face of those challenges, and to fast-track plans for adopting new regulations aimed at combating money laundering in the Bureau De Change (BDC) segment.
He said that the Committee considered the developments in money market rates which rose astronomically to peak at 40.0 per cent on Sept. 18. “However, these developments are temporary, arising from the postponement/stalemate in sharing the monthly Federation Account Allocation Committee Revenues,“ he added.
