•Raises interest rate to 24.75%
By Adanna Nnamani, Abuja and Chinwendu Obienyi
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) rose from its 294th meeting on Tuesday with a decision to raise the monetary policy rate (MPR) from 22.75 per cent to 24.75, representing 200 basis points.
It also revealed that despite clearing valid foreign exchange backlogs, there has been a growing number of ineligible FX requests which stand at $2.4 billion so far.
The CBN Governor, Olayemi Cardoso, who disclosed these at a press briefing held after the MPC meeting on Tuesday said investigations were ongoing by law enforcement agencies to fish out those involved in $2.4 billion invalid forex claims.
Cardoso said the committee also adjusted the asymmetric corridor around the interest rate to +100/-300 basis points. The MPC retained the Cash Reserve Ratio of Deposit Money Banks at 45.0 per cent, but adjusted the Cash Reserve Ratio of Merchant Banks from 10.0 per cent to 14.0 per cent. It however, retained the Liquidity Ratio at 30.0 per cent.
According to the CBN governor, the considerations of the Committee at the meeting focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability. These considerations underscored the importance of the CBN’s commitment to the price stability mandate and the need to urgently bring inflation under control to ensure that purchasing power of ordinary Nigerians is restored in the short to medium term.
Cardoso said the MPC noted the continued rise in headline inflation, driven largely by food prices because of supply shortages and high cost of logistics and distribution, and therefore, was of the view that addressing food insecurity is key to containing current inflationary pressures.
“The Committee therefore called for the full implementation of the Federal Government’s agricultural policies and programmes to improve food supply and further advised for broader fiscal consolidation particularly on the improvements of tax collection and tax-to-GDP ratio,” he stated.
He added that the MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable, thus, called on the apex bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macroprudential guidelines.
According to him, “The MPC also enjoined the Bank to expedite action on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalized world.
“Consequently, at this meeting, the MPC was faced with the option of either progressing with its tightening cycle or hold, to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement. After reviewing the balance of risks and the near-term inflation outlook, Members were convinced of the need to progress with the tightening cycle.”
On how the CBN was able to handle the FX backlog challenge, Cardoso noted that the bank worked with Deloitte consultants in painstakingly getting a proper forensic audit of the transactions to determine which was valid or ineligible.
He stated that the bank observed that some of the documentations were unsatisfactory and outrightly illegal.
“The figure is about $2.4 billion ineligible. As I said, there have been several cases, that go from documentation form M not available as I mentioned earlier, cases where allocations were made and no requests will ask for, or cases where allocations were made and no naira was available. The list goes on and that is a good example of some of the infractions that we noted”, Cardoso said.