The Central Bank of Nigeria (CBN) has raised its Monetary Policy Rate (MPR) by 50 basis points to 18%.
The Governor of the bank Mr. Godwin Emefiele, announced this at the end of the Monetary Policy Committee (MPC) meeting in Abuja, yesterday.
According to him, all the other parameters were left unchanged.
Consequently, it retained the asymmetric corridor at +100/-500 basis points around the MPR; Cash Reserve Ratio at 32,5 percent; and Liquidity Ratio at 30 percent.
In arriving at the decision to further tighten the rate, Mr. Emefiele said, “MPC examined the impact of possible further rate hike on the stability of the banking system and was convinced that a further rate hike would not have a negative impact on the stability of the banking system.”
Mr. Emefiele assured that Nigerian banks were insulated from the current banking crisis in the United States of America and Switzerland because they were not directly exposed to the affected banks.
According to him, the MPC focused on its attention not only on the inflationary trend in most economies of the world but also on the reported impact of policy rate hikes aimed at reining in inflation and financial systems stability in the global financial system.
His words, “MPC hence took time out to discuss the recent bank failures in the US and Switzerland and the events that occurred following the persistent hikes in the US and how this has adversely impacted the broad portfolio of banks in the US.
“Following new risks of financial contagion emerging from the scenario of failed banks in some advanced economies, members (of the PMC) examined the possibility of shocks in the Nigerians banking system and concluded that Nigerian banks remain considerably insulated from such likely contagion.
“The banks have been able to achieve this through micro and macro prudential guidelines that ensured that individual banks and the banking industry in Nigeria have adequate buffers to ward-off global contagion.”
The governor said that the CBN has already undertaken a check on the banks and that “there is no direct investment by Nigerian banks in SVB (Silicon Valley Bank Group) that would have a direct result in the loss of investment.”
Mr. Emefiele said that CBN would increase its supervisory and regulatory roles to ensure that the Nigerian banks remained stable and resilient.
On Naira redesign, the CBN boss disclosed that the implementation of the policy, “has resulted in the reduction in currency outside the banks, indicating expected improvement in the potency of monetary policy tools.”
His words, At the beginning of the Naira Redesign policy we said that there was about N3,23 trillion in circulation out of which only N500 billion was held in the banking system, while N2. 73 trillion was outside the banks.
“It was published yesterday that currency in circulation is close to N1 trillion CBN continue to pump the newly redesigned currency into the market. The truth is that at some point we will need to re-assess to know whether the currency in circulation has attained an optimal level so as to put in place measures to ensure that we don’t go to the level where we were before that people kept money outside the banking system for their own benefits.
He admitted the challenges imposed by the limit of cash withdrawals at the face of frequent downtime in bank transaction channels and urged online payment platforms to urgently overcome such challenges, in the interests of the banking public.
“I must apologise. Yes, online channels fail. But no doubt it is as a result of the deluge of online transactions that hit the banking industry. But it is being resolved. On a daily basis, our Payment System Management Department monitor the online payment platforms so as to make sure that when there is a downtime, they are quickly resolved so that transactions can go on smoothly.”
Subsidy removal risks
Mr. Emefiele said that the planned removal of petrol subsidy could exacerbate inflationary trend in the months to come, therefore further justifying a tightening position.
He said, “The MPC observed the continual upward risks to price development around the expectations of the removal of the PMS (Premium Petroleum Spirit) subsidy, rising prices of other energy sources, continued exchange rate pressure and uncertain climatic conditions. These in the view of members, provided a compelling argument for an upward adjustment of policy rate, albeit, less aggressively.”
The committee, according to the governor, urged fiscal authorities to explore other sources of non-oil revenue to reduce the fiscal deficit and public debt.
On e-Naira, the governor disclosed that in the last 18 months 13 m wallets, with N22 billion value of transactions, have been created.