By Ossom Raphael
Following positive economic indicators, the Governor of the Central Bank Nigeria (CBN), Godwin Emefiele, on Tuesday assured that Nigeria would be out of recession in the 3rd quarter of the year.
The Apex Bank governor said this while briefing journalists immediately after the conclusion of the Monetary policy meeting in Abuja.
Emefiele maintain that the positive indicators such as inflation moving upwards and GDP moving up from negative aggregate are indications that by the third quarter of the year, the country will be out of recession.
“With all the positive signs we see, inflation trending downwards, GDP, I will say improving to the extent that the negative growth rate has decelerated, I will say quite significantly the fact that we’ve seen forex go to real sector and production capacities and industrial capacities are beginning to improve.
“We’ve seen positive signs in various economic sectors of the economy. I am very confident that by the end of 3rd quarter that we would be out of this and I still hold that position” Emefiele said.
Meanwhile, the CBN Governor announced that the committee voted to retain Monetary Policy Rate (MPR), at 14 per cent
Emefiele said the committee also decided to retain Cash Reserve Ratio (CRR), at 22.5 per cent, Liquidity Ratio at 30 per cent and the Asymmetric Corridor at +200 and -500 basis points around the MPR.
He said the committee’s decision was in consideration of the challenges weighing down the domestic economy and the uncertainties in the global environment.
He disclosed that eight out of 12 members were present at the meeting and they all voted unanimously to retain the MPR alongside all other policy parameters.
“The MPC is particularly pleased with the gradual retreat in inflation, the relative stability in the Naira exchange rate across all segments of the foreign exchange market and the improved prospects of foreign investment inflow. The Committee also welcomes the passage of the 2017 Budget and called on the relevant authorities to ensure its judicious implementation, especially, the capital budget in line with the Economic Recovery and Growth Plan.
“It, however, noted the associated risks to banking system liquidity of the envisaged fiscal injections during the remainder of the year. Against this risk, the Committee contemplated the prospects of further tightening of monetary policy should the need arise.
“The MPC however, noted that further tightening would widen the income gap, depress aggregate consumption and adversely affect credit to the real sector of the economy.
“Nevertheless, against the backdrop of the rather unclear outlook around key economic activities (food production especially) and some optimism about current deceleration in inflation as well as relative stability in the naira exchange rate, the MPC was reluctant to alter the current policy configuration in any fundamental manner.
“This is intended to allow the existing policies to fully achieve their intended goals and objectives. On the other hand, the Committee noted that the cost of capital in the economy remains high and not helpful to growth.
The MPC was however, concerned that loosening would exacerbate inflationary pressures and worsen the gains so far achieved in the exchange rate of the naira. It was also convinced that loosening would further increase the negative real interest rate as the gap between the nominal interest rate and inflation widens” Emefiele said.
The Apex Bank Governor, said the Committee noted hoped that the ongoing reforms by the government would address production bottlenecks.
“The MPC recognized the continued influence of structural factors such as high energy and transportation costs, production bottlenecks on prices and hoped that the ongoing reforms by the Government would address some of these constraints.
“Money market interest rates moved in tandem with the level of liquidity in the banking system. Rates were relatively stable during the review period. The interbank call rate opened at 11.40 per cent on March 22, 2017 and closed at 38.94 per cent on May 18.
“The movement in net liquidity position was influenced by sales at the Open Market Operations, foreign exchange interventions, the payment of statutory revenues to States and Local Governments as well as maturing CBN Bills.
“The MPC noted the bullish trend in the equities segment of the capital market as the All-Share Index (ASI) rose by 10.20 per cent from 25,516.34 on March 31, 2017, to 28,113.38 on May 19, 2017.
“Similarly, Market Capitalization (MC) increased by 10.10 per cent from N8.83 to N9.72 trillion during the same period. Relative to end-December 2016, the capital market indices rose by 4.60 and 5.10 per cent, respectively, reflecting growing investor confidence following improvements in foreign exchange supplies reflected in the over US$1 billion injected through the investor window and exchange rate management. Total foreign exchange inflows through the CBN increased by 69.77 per cent in April, 2017 compared with the previous month.
The MPC has not made any major monetary policy change since July 2016.