MPC maintains interest rate at 13 per cent

The Central Bank of Nigeria (CBN) has decided to maintain interest rate at 13 per cent. The decision was reached at the 243 meeting of its Monetary Policy Committee (MPC) on Tuesday.

This was revealed on Tuesday by Godwin Emefiele, CBN governor, who said that the decision was taken after considering the harsh external economic environment and significant risks in the domestic economy.

“The committee analysed key developments in the global and domestic economic and financial conditions, as well as the outlook for the rest of 2015,” he said.

“The committee expressed satisfaction with the impact of the decisions taken to harmonise the foreign exchange market. As a consequence of those actions, the interbank exchange rate has stabilised after an initial adjustment.

“The committee, however, expressed concern about the wide divergence between the interbank and the bureau-de-change exchange rates, which provides an avenue for arbitrage and speculative activities in the market.”

The naira has dropped from around N165 to the dollar a year ago to N198 this week, but spiked as low as 206 in the interbank market last month and is trading weaker than 220 in the black markets, leading to illegal use of the dollar in day-to-day domestic transactions.

According to Emefiele, the MPC reiterated that the naira remained the currency of transaction in the economy and advised the bank to take all possible measures to address this development.

“Thecommittee took note that while adverse developments in international oil prices had affected government revenues and reserves accretion and impacted negatively on capital flows, the financial system remained stable with key banking stability indicators showing robustness,” he said.

“In the light of this, the committee directed the bank to take all necessary measures to improve the resilience of the financial system as well as the overall economic environment and functioning of the financial markets.

“In the light of the above considerations, the committee observed that its previous decisions needed time for their effects to fully permeate the economy and therefore, voted to maintain the current position.

“Consequently, all eleven members present (out of twelve) unanimously voted to retain the MPR at 13 per cent; retain the CRR on Private Sector deposits at 20 per cent; retain CRR on Public Sector deposits at 75 per cent; and retain the liquidity ratio at 30 per cent.”

The MPC has the responsibility for formulating monetary and credit policy derived from Section 12 Sub-sections (1) to (5), CBN Act of 2007 as amended.

It consists of 12 members, including the governor of the bank who shall be the chairman, the four deputy governors of the bank, two members of the board of directors of the bank, three members appointed by the president; and two members appointed by the governor.