Central Bank of Nigeria (CBN), has retained the Monetary Policy Rate (MPR) at 12 per cent with a corridor of +/-200 basis points around the midpoint. It also retained the liquidity ratio at 30 per cent and the public sector Cash Reserve Requirement (CRR) at 75.0 per cent, while leaving the private sector CRR at 15.0 per cent.
This was as it declared that the reduction of interest rate was part of the apex bank’s five-year agenda. Speaking at the end of 96th Monetary Policy Committee (MPC) meeting of the apex bank in Abuja, Tuesday, the Governor of CBN, Mr. Godwin Emefiele, who was attending his first MPC meeting as head of the apex bank explained that CBN took the decision following concerns about the liquidity level and the trending up-tick in inflation, which may not be unconnected with the poor harvest in some agricultural producing areas, particularly in the north eastern and central states of the country.
According to him, other reform measures could dampen food prices in the short to medium term and restore inflation to a sustainable long-run path.
“Overall, the committee noted that the policy direction for inflation rate and interest rate must be seen not only in the context of price and financial stability but also in enhancing the quality of life of Nigerians and promoting employment generation,” he said.
On the external sector developments, Emefiele said that foreign exchange market witnessed a considerable degree of stability while the exchange rate at the Retail Dutch Auction Segment (RDAS) of the market was flat at N157.29/US$ in the review period.
“At the inter-bank market, the selling opened at N165.20/US$ and closed at N162.95, representing an appreciation of N0.75 or 0.46 per cent. Conversely, at the BDC segment, the exchange rate opened at N167.00/US$ and closed at N168.00/US$, representing a depreciation of N1.00 or 0.6 per cent.
“Gross official reserves rose to $40.20 billion by July 18 from $37.31 billion at end-June 2014. The increase in reserves was mainly due to increased accretion and moderation in the rate of depletion,” he said.
The governor also declared that the interest rate reduction is a five-year programme, saying that it is in line with his promise on June 5.
“Part of the monetary policy is to build strong reserves for the country. I believe that the objective was achieved given that our reserves now stand at over $40 billion and can support about 10-month imports. I also know that part of the mandate is to ensure that low as much as possible interest rate as well as keeping inflation at the level that makes life easy and good for our people.
“We are working on the issue of interest rate. It is a statement I made on June 5 and what I said on that occasion is that we are going to pursue a gradual reduction of interest rate. That agenda is a five-year agenda. Like I said also during that press briefing that we are going to monitor the liquidity situation in the market, monitor the spending of Nigerians and government in the runoff towards the election and as we begin to see that the micro-economic variables are moving in the direction we expect, you will begin to see the reversal interest rate in the direction of going low.
“We are optimistic of the mandate and the promise we made to our people to bring down interest rate but I will like to crave your indulgence that we will continue to look at all the variables. We will do everything possible to ensure that this is achieved. But it is going to be within the ambit of monitoring all the parameters to ensure that we do not achieve that and create another problem in another direction,” he noted.
