The Central Bank of Nigeria’s Monetary Policy Committee (MPC) rose yesterday from its two-day meeting with a decision to hold rates, in line with the prediction of financial analysts.
The CBN warned that there was need to strengthen fiscal and monetary policies in order to avert a protracted recession.
With inflation at 16.1% and the need to maintain stable exchange rate, there was little to no room for the MPC to vote to ease the headline interest rate.
The MPC voted, 6-2, in favour of maintaining the rate at 14%.
CBN Governor, Mr. Godwin Emefiele, announced the decision of the committee in a communiqué issued at the end of the meeting. He said: “In consideration of the headwinds confronting the domestic economy and the uncertainties in the global environment, the committee decided by a vote of six to two to retain the Monetary Policy Rate, MPR, at 14 per cent alongside all other policy parameters.
The CBN lamented on the growing indebtedness of the Federal Government, occasioned by President Muhammad Buhari’s ambitious macro-economic borrowing plan, warning that if care was not taken the private sector could be crowded out.
“The MPC noted the widening fiscal deficit of N2.51 trillion in the first half of 2017 and the growing level of government indebtedness and expressed concern about the likely crowding out effect on private sector investment.
“While urging fiscal restraint to check the growing deficit, the Committee welcomed the proposal by government to issue sovereign-backed promissory notes of about N3.4 trillion for the settlement of accumulated local debt and contractors arrears.”
Emefiele added: “Available forecasts of key macroeconomic indicators point to a fragile economic recovery in the second quarter of the year. “The committee cautioned that this recovery could relapse in a more protracted recession if strong and bold monetary and fiscal policies are not activated immediately to sustain it.”