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The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday, says the nation’s economy is on a path to moderate recovery but warns that cares should be taken on certain issues
THE Monetary Policy Committee of the Central Bank of Nigeria, CBN, which met on July 24 and 25, 2017, has said that the Nigerian economy is on a path “to moderate recovery with a positive short-to medium-term outlook, premised largely on fiscal stimulus and a stable naira exchange rate.”
In a communiqué signed by Godwin Emefiele, governor of the CBN, eight out of the members 12 that attended the meeting examined both the domestic and global economies and their impacts on the nation’s economic growth.
Hence, the two-day meeting, which held at the CBN’s headquarters in Abuja, decided that the current Monetary Policy Rate should remain at 14 percent. Six out of eight members agreed to maintain the current monetary policy stance, which two others opposed it.
Apart from retaining the MPR at 14 percent, the committee also retained the Cash Reserves Ratio, CRR, at 22.5 percent.
It also retained are the Liquidity Ratio, LR, which was left at 30 percent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.
Besides, the communiqué said that it was observed that data from the National Bureau of Statistics, NBS, showed that the contraction in the economy moderated to 0.52 percent in first quarter of 2017 from 1.30 percent in fourth quarter of 2016.
“The data further revealed that 15 economic activities recorded positive growth in Q1 2017, showing strong signs of recovery. The Purchasing Managers Index, PMI, for manufacturing and non-manufacturing activities stood at 52.9 and 54.2 index points in May and June 2017, respectively from 52.7 and 52.5 index points in May 2017, indicating an expansion for the third consecutive month.
“Similarly, the Composite Index of Economic Activities, CIEA, rose from 55.85 to 59.50 index points between April and June 2017. The Committee noted the continuous positive effects of improved foreign exchange management on the performance of manufacturing and other economic activities. Non-oil real GDP grew by 0.72 per cent in Q1 2017, reflecting growth in the agricultural sector by 0.77 per cent in the same period. Provisional data also showed that the external sector remained resilient in Q2 2017, as the overall Balance of Payments, BOP, position recorded a surplus of US$0.65 billion, equivalent to 0.8 per cent of GDP. The Committee hopes that the implementation of the 2017 budget and the Economic Recovery & Growth Plan, ERGP, will further strengthen growth and stimulate employment.”
On headline inflation, the communiqué said that the committee noticed declined in inflation for the fifth consecutive month in June 2017, to 16.10 percent from 16.25 percent in May, and 18.72 percent in January 2017.
The core inflation, it said, “moderated to 12.50 percent in June from 13.00 percent in May 2017 while the food index rose marginally to 19.91 percent in June from 19.27 percent in May 2017.” The committee said the development could be traced to intermittent attacks by herdsmen on farming communities, sporadic terrorist attacks in the North-East and other seasonal farming effects.
The committee also attributed the moderation in inflation to be partly due to the effects of the relative stability in the foreign exchange market, stemming from improved management, which promoted increased inflows.
Nevertheless, the committee said it was particularly concerned about the continued pressure from food inflation but hopeful that the situation would dissipate in the third quarter as harvests begin to come in.
That notwithstanding, the committee said: “Available forecasts of key macroeconomic indicators point to a fragile economic recovery in the second quarter of the year. The committee cautioned that this recovery could relapse in a more protracted recession if strong and bold monetary and fiscal policies are not activated immediately to sustain it.
“Thus, the expected fiscal stimulus and non-oil federal receipts, as well as improvements in economy-wide non-oil exports, especially agriculture, manufacturing, services and light industries, all expected to drive the growth impetus for the rest of the year must be pursued relentlessly.
“The Committee expects that timely implementation of the 2017 Budget, improved management of foreign exchange, as well as security gains across the country, especially, in the Niger Delta and North Eastern axis, should be firmly anchored, to enhance confidence and sustainability of economic recovery.
“The Committee identified the downside risks to this outlook to include weak financial intermediation, poorly targeted fiscal stimulus and absence of structural programme implementation.”
— Jul 25, 2017 @ 18:00 GMT |
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