The Central Bank of Nigeria (CBN) will not hurry into reducing the controlling monetary policy rates (MPR), its governor, Godwin Emefiele, said on Tuesday.
Mr Emefiele said at the end of the Monetary Policy Committee (MPC) meeting in Abuja on Tuesday that Nigerians are not likely to see the rates come down further in the near future until inflation drops to single digits.
The CBN governor said although the inflation rate has moderated from 11.4 per cent in May to 11.22 per cent in the latest report by the National Bureau of Statistics, tightening of monetary policy was not an immediate option.
CBN’s target is between six and nine per cent inflation rate.
“Because we are still above that threshold, the CBN will only be cautious, and not going to be in a hurry to reduce MPR to the level most people anticipate,” he said.
During the meeting, the MPR was left unchanged at 13.5 per cent, along with other variables, like the cash reserve requirement (CRR) at 22.5 per cent and liquidity ratio at 30 per cent.
The asymmetric corridor was also retained at +200 and -500 basis points around the MPR.
According to him, without necessarily adjusting the MPR, the CBN can take other measures like the prescription of minimum deposit rates to the deposit money banks to increase the loans deposits in the economy.
At the MPC meeting in March this year, Mr Emefiele recalled the mandate to the CBN to take steps to improve the poor lending situation by banks.
He said the MPC had stressed the need to look into how the banks could refocus their lending to the private sector to grow the economy.
As intermediates and catalysts to economic growth, he said banks must be able o work with CBN to provide credits to the private sector.
To realise that goal, the CBN boss said the CBN released guidelines two weeks ago that prescribed the minimum lending rates for bank
Under the guidelines, he said, the CBN promised certain incentives for banks that lend to the private sector, or provide consumer credits to the small and medium enterprises.
On the contrary, the guidelines provide that banks that do not lend will be sanctioned, by taking at least 50 per cent of the unlent portion of their deposit into the cash reserve requirement (CRR).
The CRR is the funds kept with the CBN as a minimum deposit a commercial bank must hold as reserves, rather than lend out.
The deadline for compliance with the regulation is September 30.
Mr Emefiele said after that deadline, the CBN would begin a month by month monitoring and prescription of deposit loan ratios for the banks to encourage lending to grow the economy.
To mitigate credit risk, he said the MPC asked the CBN to de-risk the financial markets, through the development of a reliable credit scoring system, to encourage DMBs to safely grow their credit portfolios.
The MPC also called on the fiscal authorities to speedily expand the tax base of the economy to improve government revenue and stem the growth in public borrowing.
It further urged the government to build fiscal buffers to avert macroeconomic downturn in the event of a decline in crude oil prices.
Similarly, the MPC wants the CBN to intensify efforts to encourage Nigerians in the diaspora to use official sources for home remittances.
The MPC wants the CBN to consider the introduction of incentives, such as the reduction of charges on diaspora home remittances into Nigeria.
On the African Continental Free Trade Agreement, the MPC urged the Federal Government to adopt measures to aid the economy in realising the benefits and full potentials of that agreement.
In particular, MPC stressed the need to resuscitate moribund industries in Nigeria and improve key infrastructure to strengthen the productive base of the economy, create job opportunities as well as boost exports.
Noting the creation of a common currency in the West African Zone, ECO, by January 2020, the MPC wants the CBN to ensure that Nigeria is properly positioned to maximise the benefits of monetary integration.
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