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CBN Calls for Revival of Moribund Industries to Create Jobs

Retains MPR at 13.5 %

The Central Bank of Nigeria, CBN, says there is need to resuscitate moribund industries in Nigeria and improve key infrastructure in order to strengthen the productive base of the economy, create job opportunities as well as boost exports.

This was contained in a communique issued at the end of its two-day Monetary Policy Committee, MPC meeting, which ended on Tuesday in Abuja. The MPC also canvassed   increased consumer credit; mortgage loans; as well as granting loans to Small and Medium Enterprises, SME in the country.

Godwin Emefiele, CBN governor announced that the MPC retained its Monetary Policy Rate, MPR at 13.5 per cent. He said the committee decided unanimously by a vote of all members present to retain the rate and to hold all other policy parameters constant.

Emefiele also disclosed that the committee in its considerations, noted the need to boost output growth through sustained increase in consumer credit and mortgage loans and granting loans to our Small and Medium Enterprises companies.

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The CBN governor disclosed that the decision was informed by the conviction of members that key macroeconomic indicators are trending in the right direction. Consequently, the MPC unanimously voted to retain the MPR at 13.5 per cent; retain the asymmetric corridor at+200/-500 basis points around the MPR; retain the CRR at 22.5 per cent; and retain the Liquidity Ratio at 30 per cent.

The 11-member committee also observed that the management of the CBN had started the prescription of using benchmark loan-to deposit ratios to redirect the banks focus to lending. “To mitigate credit risk, the Committee enjoined the Management of the Bank to de-risk the financial markets, via the development of a reliable credit scoring system, similar to what applies in the advanced countries as this will encourage Deposit Money Banks (DMBs) to safely grow their credit portfolios.

“The MPC called on the fiscal authorities to expedite action on expanding the tax base of the economy to improve government revenue and stem the growth in public borrowing. It further urged the fiscal authorities to build fiscal buffers to avert macroeconomic downturn in the event of a decline in oil prices. The Committee also called on the Bank to intensify efforts to encourage Nigerians in the Diaspora to use official sources for home remittances, noting that the effort will complement other measures geared towards improving Nigeria’s current account balance. It enjoined the Bank to consider introducing incentives such as the reduction of charges on Diaspora home remittances into Nigeria,” the communiqué read.

The Committee urged the federal government to put in place measures to aid the economy in realising the benefits and full potentials of the African Continental Free Trade Agreement (AfCFTA). It also noted the positive developments towards the creation of a common currency in the West African Zone by January 2020 and commended both the government and the CBN for pushing forward the initiative. It however, enjoined the CBN to ensure that Nigeria is properly positioned to maximise the benefits of monetary integration.

According to the communique, the MPC in consideration of the specific policy options to adopt; to hold, loosen or tighten, observed that whilst the focus on growth was imperative, the mandate of price stability remains sacrosanct; that given the happenings in the external sector and the fact that inflation is moderating, tightening of monetary policy should not be an option at this time, as restriction of the capacity of the Deposit Money Banks, DMBs to create money could curtail their credit creation capabilities.

“On the contrary, the MPC expressed the view that, whilst loosening could increase money supply, stimulate aggregate demand and strengthen domestic production, the economy could be awash with liquidity especially if loosening drives growth in consumer credit without commensurate adjustment in aggregate output.”

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