By EMMANUEL ELEBEKE
ABUJA—The Monetary Policy Committee, MPC, of the Central Bank of Nigeria, CBN, rose from its 87th meeting yesterday, in Abuja, saying that the bank would retain its Monetary Policy Rate at 12 per cent.
MPR is the rate at which the CBN lends to banks, which is a key factor in determining the interest rate at which Deposit Money Banks lend to their customers.
Briefing newsmen at the end of the meeting, governor of the Central Bank, Sanusi Lamido Sanusi, stated that the committee took the decision to retain rates as it stood with MPR at 12 per cent with a corridor of +/- 200 basis points and reiterated the commitment of the MPC to act appropriately in case government spending contributed to inflation.
On why CBN has continued to retain the MPR at 12 per cent, Sanusi said the economy “cannot have low interest rate in high inflation rate regime,” adding that “CBN ‘s ability to bring down rates is a function of its ability to maintain stability.”
Sanusi said “people should also not underestimate the impact of instability on the Small and Medium Enterprises. High interest rates are not the only reason SMEs cannot access cheap credit.”
The CBN governor said he could not “tell when rates would come down, but would also like to see rates come down, just as the Federal Government wants rates to come down.”
According to the CBN governor, the committee also agreed to maintain the Cash Reserve Ration, CRR, at 12 per cent and liquidity ratio at 13 per cent as the committee admitted that broad money supply (M2) grew by 13. 72 percent in December 2012 over the level at the end of December 2011, noting that aggregated domestic credit grew by 1. 98 percent in December, which is substantially below the benchmark of 52.17 percent for the year and expressed satisfaction with the external reserve which stood at $43.849billion as at December 31, 2012, representing an increase of $1.682billion or about 3.98 percent from the level of $42.167billion at October 2012.
According to him, the MPC observed that on the average, inflationary pressure was elevated in 2012, unlike the year-on-year headline inflation rate in 2012 which stood at 12.24 percent, while the average core and food inflation year-on-year stood at 13.87 and 11.32 percent.
It noted that the food and non-alcoholic beverages, housing, water, electricity and transport were major drivers of headline inflation in December 2012 in addition to the pick up in food inflation in the later part of 2012.
The committee, he said, further observed that the performance of the global economy remained largely subdued and was characterized by uncertainty and contraction in the Euro zone and Japan, as well as lower than expected growth in the large emerging and developing economies.
In its unanimous resolutions, the committee arrived at an increase in the MPR in response to the higher oil price benchmark for fiscal 2013, reduction in MPR, in view of the declining GDP growth trajectory and headline inflation, retaining the current monetary policy stance in view of conflicting price signal.
The CBN governor also noted that the nation’s foreign reserve rose to $44 billion as at January 2013, as the average interbank call and OBB rate for the period January 2013 were 11.09 percent and 11.03 percent respectively and average lending rate increased slightly to 16.54 percent in December 2012 from 16.48 and 16.51 percent in October and November 2012 respectively.