RISING from its 112th meeting in Abuja on Tuesday, the Monetary Policy Committee (MPC) of Central Bank of Nigeria (CBN) warned that banking sector was becoming less resilient as a result of the adverse macroeconomic environment.
Commenting on outlook for financial stability, the Committee noted that the banking sector was becoming less resilient as a result of the adverse macroeconomic environment.
“Nevertheless, the MPC reiterated its resolve to continue to pursue financial system stability.”
To this end, the committee enjoined the management of the bank to work with DMBs to promptly address rising NPLs, declining asset quality, credit concentration and high foreign exchange exposures.
And afraid of being accused of insensitive to needed growth, the committee also voted to retain all the key policy rates as a way to maintain stability and promote investment.
“The committee, in consideration of the headwinds in the domestic economy and the uncertainties in the global environment, decided by 9 out of 10 members to retain the MPR at 14.0 per cent alongside all other policy parameters. One member voted to raise the MPR.
“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.”
Addressing journalists at the end of the meeting, CBN Governor, Godwin Emefiele, said it was the conviction of the MPC that fiscal policy remained the most potent panacea to most of the key negative economic undercurrents including stunted economic activity, heightened unemployment and high inflation.
While noting recent moderate recovery in oil prices, the committee noted that the era of high oil prices was over, thus making diversification away from oil more imperative today than ever.
Emefiele announced that total foreign exchange inflows and outflows through the CBN decreased by 8.87 per cent 7.32 per cent respectively in February, 2017 compared with the previous month, as foreign exchange market receipts were significantly lower.
“Available data and forecasts of key economic variables as well as the newly released Federal Government’s Economic Recovery and Growth Plan (ERGP), indicate prospects of output recovery in 2017.
“The committee expects that the implementation of this plan, the new foreign exchange policy as well as the current effort by the Federal Government to restore peace in the Niger Delta region would help revive economic growth and stabilize prices.”
However, it identified the downside risks to this outlook to include the possibility of a slower-than-expected rate of global economic activity, tight monetary policy stance by the U.S. Fed, resulting in strengthening U.S dollar, and low oil prices.
“In particular, the Committee noted the persisting inflationary pressures; continuing output contraction; high unemployment rate; elevated demand pressure in the foreign exchange market; low credit to the real sector and weakening financial system indicators, amongst others.
Nonetheless, members welcomed the improved implementation of the foreign exchange policy that resulted in naira’s recent appreciation.
The bank has in recent weeks pumped foreign currency into the currency market as a way of ensuring that those in need of basic travel allowance, paying school fees, paying for medical treatment have access to foreign currency.
Similarly, the Committee expressed satisfaction on the release of the Economic Recovery and Growth Plan, and urged its speedy implementation with clear timelines and deliverables.
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