The Monetary Policy Committee of the Central Bank of Nigeria on
Wednesday expressed concern over the increase in allocations to the
three tiers of government, stating that there was a need for strong
stabilisation programmes to freeze the growth in aggregate
expenditure.
The CBN Governor, Godwin Emefiele, said the committee called on
the Federation Account Allocation Committee to create savings
needed to stabilise the economy against future oil price-related
shocks.
He said, “The Monetary Policy Committee observed increasing
monetisation of oil proceeds as evident in the growing FAAC
distributions relative to the 2017 level of disbursement.
“The committee urged the government to initiate strong
stabilisation programmes and to freeze the growth in its aggregate
expenditure and FAAC distributions in order to create savings
needed to stabilise the economy against future oil price-related
shocks.”
the committee also called on the National Assembly to speedily
pass the 2018 budget.
The MPC, at the end of its meeting, resolved that a quick
passage of the 2018 budget would keep the fiscal policy on track
and deliver the urgently needed reliefs in terms of employment and
growth for the people.
The 2018 Appropriation Bill, which was submitted in October last
year by President Muhammadu Buhari, has been a subject of
disagreement between the Executive and the National Assembly.
Announcing the decision of the committee at the end of its
two-day meeting held at the apex bank’s headquarters in Abuja,
Emefiele said the committee also urged the Federal Government to
offset its huge debts to contractors.
He stated that if the N2.7tn contractor debts were settled by
the Federal Government, a sizable portion of the huge
non-performing loans in the Deposit Money Banks would be
addressed.
Emefiele said, “The committee notes with satisfaction the
gradual implementation of the Economic Recovery and Growth Plan in
an effort to stimulate economic recovery.
“The committee urges the quick passage of the 2018 Appropriation
Bill by the National Assembly so as to keep the fiscal policy on
track and deliver the urgently needed reliefs in terms of
employment and growth for the citizenry.”
The CBN governor also disclosed that the committee agreed to
leave the Monetary Policy Rate unchanged at 14 per cent.
He explained that nine members of the committee unanimously
agreed to maintain the current monetary policy stance.
He said apart from the MPR, the committee also retained the Cash
Reserves Ratio at 22.5 per cent and the Liquidity Ratio at 30 per
cent; while the Asymmetric Window was left at +200 and -500 basis
points around the MPR.
The governor noted that the decision to hold the rates had
nothing to do with the fact that some of the members were new on
the committee, adding that they were well qualified and experienced
for the job.
Explaining the rationale behind the decision to retain the
rates, Emefiele said the committee was of the view that while
further tightening would strengthen the impact of the monetary
policy on inflation, such a decision could potentially dampen the
positive outlook for growth and financial stability.
On the argument for loosening the current monetary policy
stance, Emefiele stated that the committee was of the view that
while such an action would strengthen the outlook for growth, it
might lead to a rise in consumer prices and put exchange rate
pressure on the naira.
On the argument to hold the rates, the committee, according to
him, believes that key macroeconomic variables have continued to
evolve in a positive direction in line with the current stance of
macroeconomic policy and should be allowed more time to fully
manifest.
He said, “The decision to hold the rates has nothing to do with
the fact that they (some members) are new. Members of the MPC are
independent-minded people with no pre-conceived mission or
decision.”
“Data is presented by the monetary policy department and based
on that, they made up their minds as to the choice options they
want to go for.”
Emefiele added that the committee observed with satisfaction the
continued rise in the external reserves, but urged the CBN not to
relent in building buffers against future price downturns.
He said the bank would use the strength of its reserves, which
he put at $49.69bn, to support the development of the nation’s
refineries by supporting investors in that sector.
He noted, “The Federal Government is encouraging private sector
investors to come into the refineries and what we do expect is that
when those private investors are coming into Nigeria to do
business, if they are foreign, they will come with dollars and
won’t need our dollars; but if they are local and would want to
import equipment, of course, they will need our dollars.
“We have lots of dollars to allocate to them to bring in their
equipment and I assure anyone who is interested in going into
refinery business that if you have your licence, we will accord
priority to you to import those equipment because we badly need
them here.
“We all know that importation of petroleum products into the
country constitutes a large portion of our imports, and at some
point rising to about 25 per cent of our import volume; and we
think that if we accelerate the process of investors going into
refineries, it will further help to conserve our forex for the
importation of goods we cannot produce in Nigeria.”
On the level of DMBs’ credit to the economy, the CBN governor
said the committee was dissatisfied with the low level of funding
by the banks.
He said a new guideline that would encourage the banks to lend
to the economy was being planned and would be released soon by the
CBN.
The governor added that the apex bank would continue to provide
single digit interest rate to key sectors of the economy under its
developmental programme.
He gave the sectors as Small and Medium Enterprises,
agricultural and core manufacturing.
Emefiele added, “We are not very satisfied that credit growth
has not been as good as we thought. For instance, between November
or December last year and February (2018), the volume of credit
practically stayed at N16tn, which we considered very low because
we think that for us to really push for growth, then Deposit Money
Banks must one way or the other be encouraged to grant credit to
those who need credit.
“The details as to the kind of guidelines that will be unfolded
by the central bank to the Deposit Money Banks to encourage them to
increase credit to the private sector so as to catalyse growth to
the economy will be made available in due course.
“However, the CBN will continue to adopt the unconventional
monetary policy approach in line with our development finance
objectives to accelerate to the weak, the needy and priority
sectors of the economy at single digit interest rate, with a view
to ensuring that we play our own role to catalyse growth for the
country.”
The Monetary Policy Committee of the Central Bank of Nigeria on
Wednesday expressed concern over the increase in allocations to the
three tiers of government, stating that there was a need for strong
stabilisation programmes to freeze the growth in aggregate
expenditure.
The CBN Governor, Godwin Emefiele, said the committee called on
the Federation Account Allocation Committee to create savings
needed to stabilise the economy against future oil price-related
shocks.
He said, “The Monetary Policy Committee observed increasing
monetisation of oil proceeds as evident in the growing FAAC
distributions relative to the 2017 level of disbursement.
“The committee urged the government to initiate strong
stabilisation programmes and to freeze the growth in its aggregate
expenditure and FAAC distributions in order to create savings
needed to stabilise the economy against future oil price-related
shocks.”
the committee also called on the National Assembly to speedily
pass the 2018 budget.
The MPC, at the end of its meeting, resolved that a quick
passage of the 2018 budget would keep the fiscal policy on track
and deliver the urgently needed reliefs in terms of employment and
growth for the people.
The 2018 Appropriation Bill, which was submitted in October last
year by President Muhammadu Buhari, has been a subject of
disagreement between the Executive and the National Assembly.
Announcing the decision of the committee at the end of its
two-day meeting held at the apex bank’s headquarters in Abuja,
Emefiele said the committee also urged the Federal Government to
offset its huge debts to contractors.
He stated that if the N2.7tn contractor debts were settled by
the Federal Government, a sizable portion of the huge
non-performing loans in the Deposit Money Banks would be
addressed.
Emefiele said, “The committee notes with satisfaction the
gradual implementation of the Economic Recovery and Growth Plan in
an effort to stimulate economic recovery.
“The committee urges the quick passage of the 2018 Appropriation
Bill by the National Assembly so as to keep the fiscal policy on
track and deliver the urgently needed reliefs in terms of
employment and growth for the citizenry.”
The CBN governor also disclosed that the committee agreed to
leave the Monetary Policy Rate unchanged at 14 per cent.
He explained that nine members of the committee unanimously
agreed to maintain the current monetary policy stance.
He said apart from the MPR, the committee also retained the Cash
Reserves Ratio at 22.5 per cent and the Liquidity Ratio at 30 per
cent; while the Asymmetric Window was left at +200 and -500 basis
points around the MPR.
The governor noted that the decision to hold the rates had
nothing to do with the fact that some of the members were new on
the committee, adding that they were well qualified and experienced
for the job.
Explaining the rationale behind the decision to retain the
rates, Emefiele said the committee was of the view that while
further tightening would strengthen the impact of the monetary
policy on inflation, such a decision could potentially dampen the
positive outlook for growth and financial stability.
On the argument for loosening the current monetary policy
stance, Emefiele stated that the committee was of the view that
while such an action would strengthen the outlook for growth, it
might lead to a rise in consumer prices and put exchange rate
pressure on the naira.
On the argument to hold the rates, the committee, according to
him, believes that key macroeconomic variables have continued to
evolve in a positive direction in line with the current stance of
macroeconomic policy and should be allowed more time to fully
manifest.
He said, “The decision to hold the rates has nothing to do with
the fact that they (some members) are new. Members of the MPC are
independent-minded people with no pre-conceived mission or
decision.”
“Data is presented by the monetary policy department and based
on that, they made up their minds as to the choice options they
want to go for.”
Emefiele added that the committee observed with satisfaction the
continued rise in the external reserves, but urged the CBN not to
relent in building buffers against future price downturns.
He said the bank would use the strength of its reserves, which
he put at $49.69bn, to support the development of the nation’s
refineries by supporting investors in that sector.
He noted, “The Federal Government is encouraging private sector
investors to come into the refineries and what we do expect is that
when those private investors are coming into Nigeria to do
business, if they are foreign, they will come with dollars and
won’t need our dollars; but if they are local and would want to
import equipment, of course, they will need our dollars.
“We have lots of dollars to allocate to them to bring in their
equipment and I assure anyone who is interested in going into
refinery business that if you have your licence, we will accord
priority to you to import those equipment because we badly need
them here.
“We all know that importation of petroleum products into the
country constitutes a large portion of our imports, and at some
point rising to about 25 per cent of our import volume; and we
think that if we accelerate the process of investors going into
refineries, it will further help to conserve our forex for the
importation of goods we cannot produce in Nigeria.”
On the level of DMBs’ credit to the economy, the CBN governor
said the committee was dissatisfied with the low level of funding
by the banks.
He said a new guideline that would encourage the banks to lend
to the economy was being planned and would be released soon by the
CBN.
The governor added that the apex bank would continue to provide
single digit interest rate to key sectors of the economy under its
developmental programme.
He gave the sectors as Small and Medium Enterprises,
agricultural and core manufacturing.
Emefiele added, “We are not very satisfied that credit growth
has not been as good as we thought. For instance, between November
or December last year and February (2018), the volume of credit
practically stayed at N16tn, which we considered very low because
we think that for us to really push for growth, then Deposit Money
Banks must one way or the other be encouraged to grant credit to
those who need credit.
“The details as to the kind of guidelines that will be unfolded
by the central bank to the Deposit Money Banks to encourage them to
increase credit to the private sector so as to catalyse growth to
the economy will be made available in due course.
“However, the CBN will continue to adopt the unconventional
monetary policy approach in line with our development finance
objectives to accelerate to the weak, the needy and priority
sectors of the economy at single digit interest rate, with a view
to ensuring that we play our own role to catalyse growth for the
country.”
Read more https://nairalaw.com/mpc-wants-reduced-allocations-to-fg-states-lgs/