The Central Bank of Nigeria (CBN) on Tuesday expressed worry about the negative implications of defects identified in some structural measures adopted under the on-going national economic transformation agenda in key sectors of the economy.
The bank’s governor, Lamido Sanusi, who identified the sectors as power and petroleum, urged the Federal Government to urgently take steps to correct the lapses in order to achieve the broad policy objectives of the initiative.
The governor, who was speaking at the end of the Monetary Policy Committee (MPC) meeting in Abuja, told reporters that members resolved to retain the Monetary Policy Rate, which is the anchor rate for lending to the Deposit Money Banks (DMBs), at 12 per cent.
The Committee also resolved to maintain the symmetric corridor of +/-200 basis points around the MPR as well as the cash reserve ratio (CRR) and Liquidity Ratio unchanged.
According to the governor, while monetary policy instruments remain crucial to economic growth on a sustainable basis, the direction of prices and output, which in the Nigerian context depend largely on fiscal and structural policies, have continued to undermine efforts by the CBN to moderate more effectively the inflationary trend in the economy.
He said the need to address the defects in the measures, especially those that hamper transparency and accountability in the operations of the key sectors, had become imperative now more than ever, in view of the worrisome developments in Euro zone, Asian and American economies and the likely negative effects on the domestic economy.
“The Central Bank is not responsible for structural reforms and the way government works, institutions have different responsibilities,” he said.
“The long term growth and stability of this economy will not be guaranteed so long as we remain mono cultural, so long as government revenue is dependent 80 per cent on the oil sector and so long as oil contributes over 90 per cent of its earnings.
“There is no alternative to pursuing reforms in electricity, reforms in the oil and gas sector that will bring in investment and increase production especially in the downstream and midstream and also build first track infrastructure that will lead to the growth of manufacturing.
“The CBN cannot do that and moving interest rate and tightening monetary policy alone will not deliver long term growth. This is a point we have always made. Monetary policy has limitations and we will continue to work and support the relevant government agencies in pushing forward these structural reforms.
“Progress has been made on the fiscal side and we hope it will continue; we need to have more progress on the structural side. There has been some work on agriculture, but more needs to be done on infrastructure in particular and on power.”
On why the Committee retained the MPR at 12 per cent, the CBN boss said the decisions taken on the MPR, CRR and LR, were largely informed by the sluggish growth in credit, stable exchange rate, healthy reserve position and benign month-on-month inflation, which, he pointed out, did not suggest a need for further tightening now.
“The Committee therefore decided by a unanimous vote to maintain the current stance of monetary policy without discounting the possibility of changing it, should economic and financial conditions warrant so in near term.
“As such, the Monetary Policy Rate (MPR) is retained at 12.0 per cent with the symmetric band at +/- 200 basis points. The Cash Reserve Requirement (CRR) and Liquidity Ratio (LR) also remain unchanged,” Mr. Sanusi added.