New Telegraph

MPC: CBN retains lending rate at 11.5%

Emefiele forecasts inflation moderation

Apex bank to float more credit facilities

 

Confronted with policy dilemma to halt rising unemployment, inflation and security challenge, the Central Bank of Nigeria (CBN) has resolved to continue with its current policy aimed at stimulating economic growth, which ultimately will lead to job creation. To this end, members of Monetary Policy Committee of the bank yesterday retained lending rate (MPR) at 11.5 per cent, Cash Reserves at 27.5 per cent, Liquidity ratio at 30 per cent around asymmetric corridor of+100/-700 basis around MPR. This was as the CBN urged deposit money banks to sustain current facility lending to businesses as a means of enabling job creation to rein in inflation. Briefing the media on the outcome of MPC decisions yesterday, CBN Governor, Mr. Godwin Emefiele, expressed worries over inflation pressure, state of insecurity and unemployment, saying the bank specifically targeted most of its recent facility interventions towards the youths, being the larger segment of population that constitutes high unemployment rate.

 

He said: “MPC has been confronted with policy dilemma. The policy dilemma that has to do with the fact that Nigeria has seen 18 consecutive months of inflationary pressure, prices rising, while at the same time, before this meeting, we were confronted with dozens of challenges associated with the contraction, which was artificial. “In our view, and in dealing with these situations, we want to deal with inflationary pressures; we will have to adapt some tight monetary policy measures to rein in inflation.

 

When you adopt the tight monetary policy stance, what it does is that it constrains liquidity, makes interest rate high and makes life difficult for those who want to access credit. If people cannot access credit, then it means they cannot go into gainful productive activity that will help stimulate output growth.

 

“And then, on one hand, we have this challenge running in opposite direction. You want to stimulate output growth, what you need to do is loose in, stimulate the economy so that output growth can be stimulated, consumption growth can be stimulated “Whereas, on the other hand, you have inflationary pressures confronting you. Inflation itself has its own damaging effect on purchasing power and the standard of living of the people.

What you will find is that you need to tame it, to adopt some measures that tighten liquidity so as to rein in inflation “At this meeting, the MPC deliberated extensively on this matter and we felt that the country has just crawled out of recession because that was the word we decided to use, not even fragile. We just managed to crawl out of recession.

 

Should monitory Policy be tightened in a way that creates disadvantage or disincentive to activities that could stimulate output growth and, therefore, reverse us back to recession, or that we should continue to bolster or stimulate the economy so as to be consolidate on growth.

 

That is what we deliberated on extensively and MPC members concluded that, given that we just crawled out of recession, there is a need for us to continue to do those things that more intensely that took us out of recession.” Given positive impacts the bank’s intervention recorded in sectors such as agriculture,

 

manufacturing, ICT, creative industry and MSMEs, he said CBN would increase its interventions in those sectors in days ahead “In terms of funding, the committee noted that the bank had disbursed funds under its various agricultural interventions towards improving food supply in Nigeria.

 

The committee noted the disbursement of N107.60 billion to 548,109 farmers cultivating 703,619 hectares of land between Q4’20 and Q1’21 to boost dry season output in support of agricultural value chain development.

 

“Total disbursements as at end-February 2021 amounted to N1.487 trillion under the various agricultural programmes, of which N686.59 billion was disbursed under the Commercial Agricultural Credit Scheme (CACS) and N601.75 billion under the Anchor Borrowers’ Programme (ABP) to 3,038,649 farmers to support food supply and dampen inflationary pressures “Under the Targeted Credit Facility, the bank has disbursed N218.16 billion to 475,376 beneficiaries, of which 34 per cent of beneficiaries are SMEs.

 

Under AGSMEIS, N111.62 billion has been disbursed to 28,961 beneficiaries, 70 percent of which are in the agricultural sector. “Under the Creative Industry Financing Initiatives mainly targeted at youths, N3.19 billion has been disbursed to 341 beneficiaries, of which 53 percent is to the movie industry. Under the National Mass Metering Programme,

N33.45 billion has been disbursed to nine distribution companies for the procurement of 605,852 meters, while N89.89 billion has been disbursed under the Nigeria Electricity Market Stabilisation Facility (NEMSF 2) to 11 distribution companies to improve the electricity supply industry in Nigeria.

 

“Under the N100 billion Health Care intervention Fund, the bank has disbursed N94.34 billion, and is willing to expand the facility to 85 projects in the pharmaceutical industry, hospitals and state governments for both brown field and green field projects, mostly to expand pharmaceutical drug lines, acquire MRI and other equipment and upgrade laboratories and other hospital services.

 

“Under the N1.0 trillion manufacturing intervention stimulus, the total of N803.36 billion has been disbursed to 228 projects across various sectors in agro-allied, mining, steel production and packaging industries, amongst others,” Emefiele explained.

 

The governor said the bank would not lose its sight on other areas while advancing facilities to key sectors he identified. “We must also take certain action that will help to moderate the rate of acceleration of inflation until we are comfortable the sort of inflation we desire.

 

We will continue on those because we know that things are not just right yet. We are on a position where we have an opportunity to reset our economy and push it in a positive direction for growth that will really impact positively on the life of our people.

 

“Then we are not going to lose sight on the rate of inflation, most of our forecast said we may move up into April but as from around May, we may begin to see a moderation in inflation, by that time hopefully we must have seen the Q1 GDP number to hope will consolidate on recovery and then begin to attack inflation very aggressively,” he noted.

 

The CBN governor said MPC members welcomed current efforts by the government and other support agencies in procuring vaccines and urged the quick and efficient deployment of the vaccines to support ongoing monetary and fiscal stimulus towards full recovery of the economy in 2021 and into 2022

 

The committee, he said reiterated its concerns on the activities of persons and groups causing security challenges in the food producing areas of the country, noting such activities contributed to the major uptick in food prices across the country. The committee called for collaborative and coordinated efforts by all the relevant agencies and stakeholders towards addressing the prevailing insecurity issues and social challenges.

 

It also called on the government to explore the option of effective partnership with the private sector to improve funding sources necessary to address the huge infrastructural financing deficit. Debunking insinuation that youths were being neglected, Emefiele said CBN had policies in place to take care of youths that constitute the bulk of unemployed segment of population.

 

“Some Nigerians have argued that the CBN policies are targeted against the youth. We are doing everything possible to put in place policies that benefit all Nigerians and CBN is very conscious of the fact that our youth population of between 18 to about 40, 45 constitute close to 60% of our population and we are doing everything possible to ensure that we take them into account in all our policy decisions,” he noted

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