FISCAL and monetary challenges thrown up by the Federal Government's deregulation of the downstream sector of the oil industry and the inflationary trend in the economy are parts of the issues to be addressed by the Central Bank of Nigeria (CBN) today.
The first Monetary Policy Committee (MPC) meeting of the apex bank in 2012 will also review major economic policies such as lending and exchange rate regimes that are expected to shape the monetary plank for the first quarter of the year. .
In a statement in the CBN's website, the apex bank said the meeting holding at its corporate headquarters in Abuja, will also adopt strategies to contain the scourge of inflation threatening the economy due to the government's fiscal policy of the deregulation of the downstream sector of the petroleum industry on January 1. .
Prices of goods and services, including major staple food items, have risen sharply as a direct consequence of the new fiscal plan and by last week, had also extended to interbank rates, which jumped from 14 per cent to 15 per cent following tight liquidity squeeze, no thanks to the delayed remittances to Federation Accounts for the funding of budgetary allocations by the Federal and state governments for this month.
The MPC, which is the highest decision making organ of the CBN, has the main function of facilitating the attainment of price stability and to support the economic policies of the Federal Government. .
Last October, the MPC held an extraordinary meeting in response to unusual developments in the global and domestic economy, with potential negative impact on domestic liquidity conditions and renewed threats to price and exchange rate stability.
After deliberating on all the reports, the committee decided as follows:
• the Monetary Policy Rate (MPR) is raised by 275 basis points from 9.25 per cent to 12.0 per cent (by a vote of eight in favour and one in favour of status quo);
• maintain the current symmetric corridor of +/-200 basis points around the MPR (by unanimous vote);
• the Cash Reserve Ratio (CRR) is increased from 4.0 per cent to 8.0 per cent from the maintenance period beginning October 11, 2011 by a vote of seven to two (two members voted for a 6.0 per cent CRR); .
• the Net Open Position (NOP) is reduced from 5.0 per cent to 1.0 per cent of share-holders' funds with immediate effect and with full compliance by October 14, 2011 (by unanimous vote); and,
• it was further agreed that the reserve averaging method of computation be suspended in favour of daily maintenance until further notice.
In November 2011, the MPC met again, statutorily, where it reviewed domestic economic conditions up to the early part of the fourth quarter of 2011 and the challenges facing the economy against the background of developments in the international economic and financial environment in order to reassess the options for monetary policy for the remaining part of the year and the first quarter 2012, where it came up with the following monetary decisions:
• a unanimous vote to retain the MPR at 12.0 per cent and the symmetric band at +/-200 basis points;
• the retaining of the CRR at 8.0 per cent;
• the adjustment of the mid-point of target official exchange rate from N150/$1 to N155/$1 and to maintain the band of +/-3.0 per cent. This means that the naira should float roughly within a range of N150/$1 to N160/$1, unless extraordinary shocks necessitate a change in stance; and,
• to encourage the CBN to continue to seek convergence between DAS and interbank rates to reduce arbitrage opportunities, avoid speculative attacks, and the emergence of a multiple-exchange rate environment.
The Guardian