Monetary Policy Committee retains lending rate at 12% – CBN Governor

The Central Bank Governor, Malam Sanusi Lamido Sanusi, on Tuesday said the Monetary Policy Committee had retained the lending rate at 12 per cent.

Sanusi said this when he briefed newsmen on the outcome of the committee’s meeting in Abuja.

He said the committee took its decision based on agreement to maintain its commitment to currency stability.

“The committee decided to retain the Monetary Policy Rate (MPR) at 12 per cent, plus-minus 200 basis points and liquidity ratio at 30 per cent,’’ he said.

He said the committee also agreed to increase the public sector Cash Reserve Requirement (CRR) from 50 per cent to 75 per cent, while the private sector CRR was retained at 12 per cent.

“All members voted for an increase in CRR on public sector deposits from 50 per cent to 75 per cent with effect from Feb. 4.
“Five members voted for a retention of CRR on private sector deposit at 12 per cent, while three members voted for an increase in this component to 15 per cent,’’ he added

The CBN governor said the committee welcomed the sustained stability of the exchange rate and single digit inflation in 2013, but identified four key concerns on in some policies.

The concerns, include depleting of fiscal buffers following the continuing decline in oil revenue, rundown of reserves and depletion of excess crude oil savings and falling portfolio and Foreign Direct Investment (FDI) inflows

The others, he said, include widening gap between the official and the Bureau De Change (BDC) rates and the creeping increase in core inflation.

“On the depletion of the fiscal buffers, the committee decried the continued fall in revenue from oil despite its stable price and production in 2013.

“Although the committee acknowledged the output losses due to theft and vandalism, this could not wholly explain the magnitude of the shortfall in revenue.

“As a consequence, the accretion to external reserve remained low, while much of the previous savings have been depleted, thereby, undermining the ability of the Central Bank to sustain the exchange rate stability,’’ he said.

Sanusi also said that the committee urged the fiscal authority to block revenue leakage and rebuild fiscal savings needed to sustain confidence and preserve the Naira.

He said the balance of the Excess Crude Account as at Jan. 17, stood at 2.5 billion dollars compared with 11.5 billion dollars at the end of December 2012.

On the Gross External Reserve, he said that as at Dec. 31, 2013, it stood at 42.85 billion dollars, representing a decrease of 0.98 billion dollars or 2.23 per cent compared with 43.83 billion dollars at the end of December 2012.

He said the decrease in the reserve resulted largely on the slowdown in portfolio and FDI flows in the fourth quarter of 2013.

Then CBN governor added that it also resulted in increased funding of foreign exchange market by the CBN to stabilise the currency.

On external sector development, he said the exchange rate remained stable at the interbank segment, but depreciated significantly at the BDC segment.

“The exchange rate at the Retail Dutch Auction System (W/rDAs) in September 2013 opened at N157.33 to a dollar, including one per cent commission and closed at N157.26 per dollar, indicating appreciation of N0.7k or 0.04 per cent.

“The inter-bank selling rate opened at N156.25 per dollar and closed at N159.90 per dollar, representing a depreciation of N3.65 or 2.34 per cent for the period.

He said that at the BDC segment of the foreign exchange market, the selling rate opened at N159.50 per dollar and closed at N172 per dollar, representing a depreciation of N12.50 or 7.8 per cent. (NAN)