The Monetary Policy Committee of the Central Bank of Nigeria has resolved to retain the Monetary Policy Rate (MPR) and Liquidity Ratio unchanged.
MPR and Liquidity Ratio stand at 11and 30 percents respectively.
In November last year, the committee decided to cut MPR from 13 per cent to 11 percent, the first time in six years, while cash reserve requirement, CRR, was reduced from 25 per cent to 20 per cent.
MPR is the rate at which the CBN lends to commercial banks, while CRR is a monetary tool used to either call up excess liquidity in the system, or release funds needed to stimulate the growth of the economy as situation demands.
During the meeting in November, the CBN had also taken far reaching decisions to strengthen the economy and stabilize the national currency, including restriction to the use of naira debit cards abroad.
Rising from meeting on Tuesday, the CBN governor, Godwin Emefiele, told reporters in Abuja that MPC resolved with a unanimous vote to retain MPR at 11 per cent; cash reserve requirement CRR at 20 per cent and; liquidity ratio at 30 per cent.
The asymmetric corridor between MPR and CRR was put at plus/minus 200 basis points and minus 700 basis points.
In taking the decisions, the CBN governor said the committee took into consideration the situation in the domestic economy and the uncertainties in the global environment, particularly the negative impact of the declining crude oil prices.
On the unstable interest rates by commercial banks, Mr. Emefiele said CBN could not intervene and regulate their rates, as this would be beyond its regulatory mandate.
“Banks are in business to make money. We cannot force them to fix interest rate at a particular level. What we can do is to continue to put in place policies that would encourage them to introduce projects that would target the lending to the real sector and the small and medium enterprises, SMEs,” he explained.
The CBN governor said despite the difficulties experienced by Nigerians with the restriction of foreign exchange for the importation of 41 items, the policy introduced in June 2015 has recorded “profoundly positive impact on Nigeria’s economy.”
“Before that policy, Nigerians were importing 20 million eggs from outside the country, while Nigerian businesses were importing tomatoes, lettuce and fish. It is time that we look inwards and produce these items locally,” he said.
He said with the restriction policy on these items, some Nigerians who have embraced the local production, like cat fish production, have said that the demand for their products had been increased by ten folds.
With the country’s foreign reserves currently at about $28 billion, Mr. Emefiele said the CBN has resolved to prioritize the allocation of the limited foreign reserves to only those involved in the importation of essential raw materials, plants and equipment.
He said the CBN would soon come up with measures to fine-tune operations in the foreign exchange market to provide some flexibility in the allocation to prospective beneficiaries in a bid to deepen the market and allow business to continue.
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