For the third time this year, the Central Bank of Nigeria (CBN) has announced the retention of the Monetary Policy Rate (MPR) at 12.0%.
The decision was taken by the Monetary Policy Committee (MPC), which met in the Nigerian capital city, Abuja, Monday and Tuesday.
A communiqué released at the end of the meeting said ”the Committee, therefore, decided by a unanimous vote to maintain the current stance of monetary policy without discounting the possibility of changing it, should economic and financial conditions warrant so in the near term.
”As such, the Monetary Policy Rate (MPR) is retained at 12.0 per cent with the symmetric band at +/- 200 basis points. The Cash Reserve Requirement (CRR) and Liquidity Ratio (LR) also remain unchanged.”
At its meeting, the MPC reviewed the conditions and challenges that confronted the domestic economy during the first five months of 2012, against the backdrop of international economic and financial developments.
Reflecting the slowdown in international economic activities, the committee noted that crude oil prices in the international market have shown signs of declining, as supply in 2012 is forecast to exceed demand.
In sub-Saharan Africa, inflation is trending upward while growth prospects are optimistically measured on the back of the resilience of the domestic economy.
MPC also noted that the new risks posed by the recession in the euro area and Chinese slowdown, in addition to the lag impact of the legacy factors associated with the financial crisis, could somewhat dampen the growth prospects.
“In addition, military coup d’états in some West African Countries and continuing pockets of political instability remain a source of concern. The Committee noted the general slowdown in the global economy and the attendant softening in commodity prices which present uncertainties to the fiscal outlook, trade, and financing flows to the domestic economy, noting the very dark clouds over global economic recovery in 2012.
”The growing trade imbalances and threats to financial flows could weaken the external and fiscal positions,” it said.
The MPC said indications are that the robust output growth recorded in 2010 and 2011 may not be replicated in 2012.
Provisional data from the National Bureau of Statistics (NBS) indicate that real gross domestic product (GDP) in first quarter grew by 6.17 per cent, down from 7.68 per cent in the fourth quarter of 2011 and 7.13 per cent in the corresponding period of 2011.
This continues a disturbing and unbroken trend of decline in growth going back to the first quarter of 2010.
But it explained that overall, real GDP growth for fiscal 2012 is projected at 6.50 per cent, down from 7.45 per cent in 2011.
Crude oil production was estimated to have declined by 2.32 per cent in Quarter 1, 2012 compared with a marginal increase of 0.05 per cent in the corresponding period of 2011.
Non-oil real GDP growth estimated at 7.93 per cent in first quarter of 2012 was much lower than the 8.73 per cent recorded in first quarter of 2011.
Growth in agriculture decelerated in first quarter to 4.15 per cent, compared with the 5.54 per cent In first quarter of 2011 and 5.74 per cent in fourth quarter of 2011. Agricultural growth rate has not been this slow in the last seven years.
The paradox of rising poverty incidence in the face of impressive economic growth further reinforces the Committee’s call for the implementation of the appropriate structural reforms in the key sectors like agriculture, power and petroleum sectors, to stimulate productivity.
Foreign exchange reserves stood at US$36.66 billion at the end of April 2012, representing an increase of US$4.02 billion or 12.32 per cent above the level of US$32.64 billion at end of December 2011.
Reserves increased to US$38.72 billion as at 17 May 2012, representing 18.63 per cent increase over the level in December 2011.
The committee explained that this increase reflected generally favourable commodity prices and inflows of capital in response to the removal of restrictions on repatriation and high domestic interest rates, as well as stable exchange rates.