Urges NASS Not To Raise Oil Benchmark In Budget
Commends FG On VAT Increase
The Central Bank of Nigeria (CBN), yesterday, maintained all its key monetary rates, which determine interest rate regime in the country, by retaining the Monetary Policy Rate (MPR) at 13.5 per cent, as well as all other parameters around the rate.
This was part of the outcome of its highest policy meeting, the Monetary Policy Committee (MPC), which ended in Abuja yesterday.
The other retained parameters included the asymmetric corridor of +200/-500 basis points around the MPR, Cash Reserve Ratio (CRR) at 22.5 per cent and liquidity ratio at 30 per cent.
The implication of the holding of the rates is that cost of funds remains at their prevailing levels, as a loosening would have reduce the cost and induce more borrowings by entrepreneurs for business expansions or establishment of new ones, all of which are a major catalyst for job creation.
Addressing journalists at the end of the MPC, CBN Governor, who is the Chairman the Committee, Mr. Godwin Emefiele, gave insight into how it arrived at maintaining status quo: “In its considerations regarding the policy options to adopt, the MPC as usual, felt compelled to review the options of whether to tighten, hold or loosen.
“The committee noted the positive moderation in inflation, though slowly from 11.08 per cent in July to 11.02 per cent in August 2019. Given that this was still above the target range of six to nine per cent, and considering the pressure on reserve accretion caused by the relatively weak crude oil price, the MPC felt the imperative to tighten.
“On the contrary, the committee was of the view that doing so in the midst of a fragile growth outlook would increase the cost of credit and further contract investment and constrain output growth.”
He continued: “On loosening, the committee felt that this would result in increased system liquidity; hence heighten inflationary tendencies in the economy, and drive growth in consumer credit, but without a corresponding adjustment in real sector output.
“The committee was also convinced that increased liquidity and interest rate moderation would result in exchange rate pressures as money supply rises.
“As regards the option to hold, the MPC opined that the option requires a clear understanding of the quantum and timing of liquidity injections into the economy before deciding on possible adjustments to the stance of monetary policy.
“The committee was also of the opinion that retaining the current position of policy offers pathways to appraising the effects of the suit of heterodox monetary policy to encourage credit delivery to the real sector, especially in the light of the subsisting implementation of the Loan-to-Deposit Ratio policy.
“In view of the foregoing, the committee decided by a unanimous vote to retain the MPR at 13.5 per cent and to hold all other policy parameters constant.”
Meanwhile, the recent plan to raise the country’s Value Added Tax (VAT) rate by 50 per cent from next year, from five per cent to 7.5 per cent has received the commendation of the apex bank, as it believes it would provide a buffer and reduce government’s borrowings at all level
CBN viewed the increase rate is very minimal, when compared with other countries of the world, adding: “We agree that this maybe painful, but it is important that we understand that government also has an obligation that it must meet, so it must raise revenue. Compare the VAT rate in Nigeria to VAT rate in any part of the world, Nigeria’s VAT rate, even at 7.5%, stands as one-off, if not the lowest in the world.
“I appeal to Nigerians to please try to show understanding. It may seem painful, but again, it is important for us to know that when government spends (because you are looking at the advance consequences it will have on the purchasing power of the person who will spend).
“You should also look at the positive implication on the fact that government raises revenue, debt services ratio is lower, government can meet its obligation to improve roads or provide money for electricity. It will also have positive implication on the GDP and average growth of the country.”
Reacting to calls by a section of the Nigerian stakeholders for the suspension of the cashless policy, as well as its charges reintroduced on deposit and withdrawal of cash, the CBN governor said there was no going back, saying the full implementation of the cashless policy has become more imperative, particularly after the recent FBI disclosure of some Nigerians involved in money laundry activities.
“I truly sympathise with the banking public and regret the inconvenience that this is causing bank customers. But cashless policy in Nigeria is not new; it was first launched in 2012, and several engagements were held with multiple stakeholders before we started this policy in 2012.
“Charges have always been on deposits and withdrawals. Withdrawal charges have been in place. Only deposit charges are new today. It was only suspended in 2014, as it was too early to begin to charge who wanted to deposit money in the banks, because we agreed that there were a lot of cash outside the banking industry and there was no need to penalise people who wanted to bring out money into the banking industry.
“We expect that over five years (2014-2019), all the cash that would have been kept in peoples houses, we should have been able to bring them into the banking industry. That is why we are saying at this time, that we need to return back to that. What you are seeing today is not new.
Follow our socials Whatsapp, Facebook, Instagram, Twitter, and Google News.
