CBN CALLS FOR CONSISTENT SOUND ECONOMIC POLICY

January 37, 2916 – The Monetary Policy Committee (MPC), the policy organ of the Central Bank of Nigeria(CBN) has emphasized the need for a consistently sound and coordinated macroeconomic policy as part of effort to lift Nigeria from its economic predicament in the medium term.

The MPC made the observation in a communiqué after a two day marathon meeting in Abuja.

In the communiqué, signed by Governor of CBN, Mr. Godwin Emefiele, the MPC emphasized the need to allow policy to produce the desired outcomes as a key consideration in the policy mix.

“The imperative for consistently sound and coordinated macroeconomic policy has become inevitable. In the medium term within which monetary policy is cast, the need to allow policy to produce the desired outcomes becomes a key consideration in the policy mix”, the MPC warned.

Consequently, the MPC said, CBN is fine tuning the framework for foreign exchange management with a view to ensuring a more effective and liquid foreign exchange market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.

The MPC believes that given sound and properly coordinated monetary, fiscal, and external sector policies, there is wide room for optimism about the medium to long term macroeconomic prospects for the Nigerian economy, especially, given the clarity in the policy direction of the administration, the various interventions in the real sector; gradual improvement in the power sector, and the reinvigorated fight against corruption.

“The Committee also believes that the effect of the softer monetary policy stance adopted at the last MPC, should start crystallizing soon through expansion of credit to critical sectors of the economy”.

The MPC also called for a more coordinated external borrowing and the necessity of coordination between monetary and fiscal policies as a prerequisite for resolving the nation’s economic problems, particularly, steering the economy away from oil dependency.

“ In particular, the Committee stressed the need for the fiscal authorities to compliment the Bank’s low interest rate policy orientation by properly coordinating its borrowing activities (and rates) with the Bank in order to push the common objective of stimulating banking system credit delivery at low interest rates to the key sectors of the Nigerian economy”, the MPC noted.

The MPC decided by a unanimous vote to retain the Monetary Policy Rate (MPR), Cash Reserve Requirement (CRR), Liquidity Ratio (LR) and the asymmetric corridor of +2/-7 around the MPR.

“In summary, the MPC voted to retain the CRR at 20.0 per cent; MPR at 11.0 per cent; Liquidity Ratio at 30 per cent; The asymmetric corridor at +200 basis points and -700 basis points”, the MPC said in the communiqué.