By Ossom Raphael
Abuja – The Governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele, has dismissed reports that the bank was over funding the federal government.
CBN Governor, who was fielding questions from journalists after the the 115 Monetary Policy Committee (MPC) meeting in Abuja said such insinuations were not true.
He said:, “Let me state categorically that the CBN has not over funded the federal government.”
Mr Emefiele, further explained that its various interventions in the economy was in tandem with global standards as it cannot fold it’s arm and allow the country become too vulnerable to economic shocks and other issues.
While reaffirming that Nigeria’s central bank remained one of the most transparent globally, Emefiele said the CBN will always play its role as the bankers’ bank, adviser to the federal government and the lender of last resort.
“For instance, if you own a fixed deposit account and for some reasons, you want spontaneous financing; your bank can allow you over draw your account. So, there is no truth about over-funding the government.
“What is over-drawn is much less than what the government has in its TSA account. This issue of over-funding the government sprang from what an online medium culled from what a member of the MPC said. It was a personal statement and this goes to show that members of the MPC are independent-minded people.
“The size of our balance sheet relative to GDP is 23 per cent. China is 49 per cent. Euro is 27, Swiss is 95. Taiwan is 98. In the US, it is 28 per cent. Ours is low and calls for no concern or worry. We need to get that clear” he added.
Meanwhile, the Apex Bank Governor, announced that the Committee voted to retain its benchmark interest rate at 14 per cent.
Emefiele said the Committee also decided to keep the Cash Reserve Ratio (CRR), at 22.5 per cent, Liquidity Ratio at 30 per cent and the Asymmetric Corridor at +200-500 basis points around the MPR.
He disclosed that 1 of the 7 members who attended the meeting had voted to cut the headline rate, while the other 6 members voted to retain the MPR and all other parameters at their current levels.
According to Mr. Emefiele, the Committee took the decision in order not to reverse the gains of achieved..
“The option was whether to hold, tighten or ease. These were subjected to extensive debate. As in previous meetings, although tightening would help rein in inflation expectations and strengthen the stability in the foreign exchange market, the Committee felt that it would further widen the income gap, depress aggregate demand and adversely affect credit delivery to the private sector.
“The Committee also noted that tightening may result in the deposit money banks re-pricing their assets and loans, thus raising the cost of borrowing and therefore heightening the already weak investment climate and non-performing loans.
“With respect to loosening, the Committee believed that although while it would make it more attractive for Nigerians to acquire assets at cheaper prices, thus increasing their net wealth, and therefore stimulate spending as confidence rises, it nevertheless, felt constrained that loosening at this time would exacerbate inflationary pressures and worsen the exchange rate and inflationary conditions.
“The Committee also felt that loosening will further pull the real rate deeper into negative territory as the gap between the nominal interest rate and inflation widens”, Emefiele, said.
The CBN boss while admitting that the Non-Performing Loans (NPLs) of some Deposit Money Banks (DMBs) were beyond the 5 per cent threshold, assured that the bank would continue to intensify its supervisory and regulatory roles to ensure that the sector remained healthy to play its role in the economy.
He announced that Nigeria’s External reserves position grew to $32.9 billion especially with $7 billion inflows in the last 7 months.
According to him, “The Committee observed that the Investment and Export (I&E) window has increased liquidity and boosted confidence in the market with over US$7.0 billion inflow in the last five months.