“It was either we aggressively address the high inflationary pressure or continue to pursue measures aimed at supporting recovery.”
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday retained the Monetary Policy Ratio at 11.5 per cent for the fifth consecutive time.
The CBN Governor, Godwin Emefiele, presenting a communique from the MPC meeting, said the committee, through unanimous vote by members, decided to hold all other parameters constant.
The Cash Reserve Ratio (CRR) was, therefore, retained at 27.5 per cent, Liquidity Ratio at 30 per cent and the Asymmetric Corridor at plus 100 and minus 700 basis points around the MPR.
Mr Emefiele said that recent developments in both the global and domestic economy presented two broad options to the MPC.
He said the MPC would continue to support the federal government in its effort to revamp the productive sector to accelerate economic diversification.
“It was either we aggressively address the high inflationary pressure or continue to pursue measures aimed at supporting recovery.
“The committee remains overwhelmingly committed to support efforts of the Federal Government in ensuring full restoration of the productive capacity of the Nigerian economy.
“Members remained focused toward achieving price stability in the short to medium term.
“The MPC noted that economic growth could be hampered in an environment of unstable prices,” Mr Emefiele said.
The CBN governor said the MPC was conscious of the fact that a drastic change in its previous policy decisions could create more challenges for the Nigerian economy.
He said the choice was between loosening the stance of policy to further ease credit or hoping to moderate price development.
“There was also the option of maintaining the old stance in order to allow the previous policy measures to continue to permeate the economy, while observing global and domestic developments.
“Committee noted that an expansionary stance of policy could reduce pricing of the loan portfolio of deposit money banks and result, therefore, in cheaper credit to the real sector of the economy.
“On the converse, these expected transmission may be constrained by security challenges and infrastructure deficits, which can only be addressed by policies outside the purview of the CBN.
“Based on the above considerations, the MPC made the decision to hold all policy parameters constant,” the CBN governor said.
He called on the federal government to decisively address lingering security challenges across the country to accelerate growth in the agricultural sector, boost economic diversification and food security.
(NAN)
