The Central Bank of Nigeria (CBN) has refused to bow to pressure to devaluate the Naira, as it announced Tuesday its decision to retain the Monetary Policy Rate (MPR) at 11 per cent with an asymmetric corridor of +200 and -700 basis points.
CBN Governor Godwin Emefiele told journalists at the end of the Monetary Policy Committee (MPC) meeting in Abuja that Cash Reserve Ratio (CRR) and the Liquidity Ratio were equally retained at 20 per cent and 30 per cent respectively.
Fielding questions from journalists, Emefiele said CBN is however, working to provide some flexibility in the forex market, with a view to deepening it in the face of persistent pressure on the Naira.
His words, “I want to assure Nigerians that we are seeking ways to improve the foreign exchange supply into the market. And as we eventually achieve this objective, this will be unfolded, so as to ensure that we fund the forex market appropriately.
“I am sure in the course of time, you will begin to see some of the efforts that we are putting in place so that you begin to see how we will provide some sort of flexibility in the market. And also deepen the market so that businesses can continue the way they are supposed to be.”
According to Emefiele, Nigeria’s foreign reserve currently stands at $28 billion as at today.
Speaking further on how to manage the reserves, the CBN boss said that the apex bank was already building several scenarios around the oil price and that it would ensure the best options possible.
He said, “With time, you will see how we will provide the needed framework for a flexible forex regime.
“We are already working on different scenarios. And we will look at them. We will look at different scenarios at both management and the monetary policy committee.
“We will continue as much as possible to engage the fiscal authorities and share our positions, to see that notwithstanding the drop in the oil prices, we will continue to run the government and continue to do business. We have said it before that the drop in oil prices is going to be with us for much longer than it used to be. Before, it used to be for about eight months.
“This time, it has been with us for more than 14 months and yet, we have not seen the light at the end of the tunnel. But we will continue to be alive to our responsibilities.”
On the failure of banks to significantly increase lending to the real sectors of the economy, the CBN boss said that in spite of the fact that the expected effects of the rate reduction was yet to translate into more lending to the real sectors of the economy, the apex bank had no power to force any particular interest rate on the deposit money banks and thus will continue to use moral suasion.
“This is a free market and so we cannot really compel them, as some people expect,” he said.
Speaking further, he said, “We will continue to adopt policies that will encourage the banks to lend to the real sectors of the economy. That was why at the last MPC meeting, we reduced CRR from 25 per cent to 20 per cent. But we now insisted that those liquidities that will be made available, only banks that are ready to lend to the real sectors, especially agriculture and SMEs, will enjoy the rebate.
“I hope the banks will heed this advice and make use of these liquidities, because up to this point, those liquidities are still sitting at the CBN.”
-Vanguard
