The Central Bank of Nigeria (CBN) Tuesday warned that the country’s recently celebrated exit from recession may be under threat in view of the slowed growth in Gross Domestic Product (GDP), which declined to 1.50 per cent in the second quarter from 1.95 percent in the first quarter of the year.
It further expressed concerns that the modest stability so far achieved in key indicators, including inflation, exchange rate and reserves since its last Monetary Policy Committee (MPC) meeting in July- also appeared to be under threat of reversal given the new data, which provided evidence of weakening macro-economic fundamentals.
Addressing journalists at the end of the two-day meeting of the MPC in Abuja, CBN Governor, Mr. Godwin Emefiele, who read the committee’s communique, urged the fiscal authorities to sustain the implementation of the 2018 budget to relieve the supply side growth constraints as well as address the flooding incidents, which have become perennial on a permanent basis.
This is as the CBN also resolved to retain the Monetary Policy Rate (MPR), otherwise known as interest rate, at 14 percent and further left the Cash Reserve Requirement (CRR) unchanged at 22.5 per cent and Liquidity Ratio at 30 percent.
The MPR is the rate at which the CBN lend to commercial banks and often determines the cost of borrowing.
Emefiele said the implementation of the 2018 budget, the improvement in the security situation as well as sustained stability in the foreign exchange market will stabilise prices and strengthen economic growth.
He said the committee believed, however, that accretion to the external reserves should strengthen the last quarter of 2018 with crude oil prices remaining above the budget benchmark price of $51 per barrel and oil production increasing to 2.23 million barrels per day.
The apex bank also urged the government to take advantage of the rebound in oil prices to strengthen the fiscal buffers.
It noted that the committee had two choices of either tightening monetary policy or maintaining it at current levels. He said seven of the 10 members voted to retain the MPR at 14 percent while three of the seven members also voted in favour of raising the CRR.
However, the CBN further expressed grave concerns over that late implementation of the 2018 budget, weakening demand and consumer spending, build-up in contractor debt and low minimum wage.
Other areas of concern include the impact of flooding on agricultural output and other economic activities, continuing security challenges across north east and north central zones and growing level of sovereign debts.
Emefiele also seized the opportunity to clarify some misconception in the CBN’s recent takeover of Skye Bank and as well as the decision to change its name to Polaris Bank, citing legal requirement.
(ThisDay)
