The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has warned the federal government to swiftly halt the country’s rising inflation which, it said, increased consecutively in the last four months.
The committee which rose from its first meeting in 2020, at the weekend, cautioned that public debt was rising faster than both domestic and external revenue, urging the authorities to tread cautiously in interpreting the debt to GDP ratio.
The CBN governor Mr. Godwin Emefiele who presided over the MPC meeting, said the Meeting held in an environment of sluggish global economic recovery and financial market vulnerabilities, and tepid domestic growth.
He announced an adjustment in the Cash Reserve Requirement (CRR) by 500 basis points from 22.5 to 27.5 per cent, while leaving all other monetary policy parameters constant.
He said the Committee reached the decision by a vote of 9 members, while two members voted to leave all parameters constant.
“In summary, the MPC voted to: 1. Change the CRR from 22.5 to 27.5 per cent; 2. Retain the MPR at 13.5 per cent; 3. Retain the asymmetric corridor of +200/-500 basis points around the MPR; 4. Retain the Liquidity Ratio at 30 per cent,” Emefiele said.
The CBN governor also disclosed that the MPC also noted the rising burden of debt services and urged the Fiscal Authorities to strongly consider building buffers by not sharing all the proceeds from the Federation Account at the monthly FAAC meetings to avert a macroeconomic downturn, in the event of an oil price shock.
“It urged Government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system. The Committee also called on Government to rationalize fiscal expenditure towards reducing the current excessively high cost of governance.
“The MPC expressed concern about the rising inflation, which increased consecutively in the last 4 months as at December 2019 to 11.98 per cent and higher than its target range of 6-9%.
“The Committee noted the slow pace and low rate of economic growth as real GDP growth of 2.10, 2.12 and 2.38 per cent in Q1, Q2 and Q3 2019, respectively, being below the population growth rate, still needs 12 sustained policy support.