The Committee noted that inflation had risen significantly, eroding real purchasing power of fixed income earners and dragging growth.
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MPR is the benchmark rate at which the CBN lends to commercial banks and it has been a key instrument in stabilising prices. “The CBN is very interested in credible price formation for the spot foreign-exchange market”.
“Given the cost-push nature of inflation in Nigeria, which largely stems from the shortage of foreign exchange, we believe that this was the right thing to have done”, said Razia Khan of Standard Chartered Bank. Price-growth quickened as Nigeria’s economy contracted 0.4 percent in the first quarter.
He said: “We would through target interventions continue to support Disbursements of funds to certain targeted sectors of the economy, particularly agriculture, mineral sector those who want to go into new and fresh manufacturing, importation of plants so as to boost industrial output”.
“Aggregate output contracted in virtually all sectors of the economy, with the non-oil sector recording a decline of about 0.18 per cent, compared with the 3.14 per cent expansion in the preceding quarter”. “It nonetheless, hopes that the deregulation in the downstream petroleum sector and the liberalization of the foreign exchange market would help bring about the much needed relief to the economy,”, the MPC said.
Earlier in the year, there were complaints that banks were not willing to take risk in giving credit to the private sector, following huge exposure in 2015; that is changing.
The MPC noted that the level of money market interest rates largely reflected the liquidity situation in the banking system during the review period. Globally, however, the equities markets remained generally bearish, in the aftermath of the Brexit vote. The rest expected rates will be left unchanged.
The Central Bank of Nigeria’s foreign-exchange trading platform has called on banks to disclose all their naira transactions, including those done with customers that weren’t previously booked, as the regulator eases its grip on the currency and tries to attract inflows.
The naira weakened 4.6 percent to 310.38 per dollar by 4:16 p.m.in Abuja.
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The MPC reaffirmed its commitment to its statutory mandate of achieving a stable naira exchange rate.
