CBN pushes quick passage of PIB , Retains Monetary Policy Rate at 12 per cent

The story is from premiumtimes

The Central Bank of Nigeria, CBN, on Monday urged the Federal Government to fast-track the passage of the Petroleum Industry Bill.

The CBN said this will serve as a strategic fiscal measure of boosting revenues and protecting the economy from the potentially dangerous implications of recent negative developments in the global economic environment.

The demand was part of the resolutions by the retained the bank’s Monetary Policy Committee, MPC, which met in Abuja.

At the end of the meeting, members resolved to retain the Monetary Policy Rate, MPR, which is the lending rate in the country’s banks, at 12 per cent, with a corridor of +/- 200 basis points around the mid-point.

The Committee also retained the Cash Reserve Ratio, CRR, at 12 per cent and the Liquidity Ratio at 30 per cent.

The CBN Governor, Lamido Sanusi, underlined the importance of the PIB to the growth of the country’s economy, pointing out that the law remained pivotal to increasing the revenue generation potentials of government.

He said the strategic importance of the sector to Nigeria’s economy, particularly recent decreasing contributions of the sector to the country’s gross domestic product, GDP, demands that all stakeholders must take steps to get the proposed law passed without delay.

Sanusi, who spoke extensively on the various economic and fiscal challenges in the Euro zone, the United States and Asian countries, said the implications for primary produce exporting countries, including Nigeria, was huge.

According the CBN boss, Nigeria’s macro-economic stability may continue to be threatened, particularly in view of the growing uncertainty in the global economy and the dwindling contributions of the oil sector to real GDP growth.

While commending the Federal Government for its determination to bridge the budget deficits and promote prudence in public finance, pointing out that in spite of the positive accretion of the foreign reserves, which peaked at $43.849 billion as at the end of last year, the economic climate still demands serious caution in fiscal and monetary measures to avert any likely macro-economic instability in the economy.

“In spite of the slow progress made in the resolution of the Euro zone crises, the prospect of recession has yet not been completely averted in the near term,” Mr. Sanusi said. “Developments in the domestic economy in the past three months highlighted some new pressure points to macroeconomic stability.”

The Committee, he said, expressed the view that shocks to the economy could come from significant fall in the demand for crude oil at the international market, leading to a fall in oil prices and government revenues, weaker exchange rate, rising inflationary pressures and depletion in external reserves.

The Committee also noted the drop in headline inflation in December 2012, although it also recognised that core inflation had risen, driven mainly by cost-push factors even in the face of sluggish growth in the monetary aggregates.

On the 2013 budget, the Committee cautioned against complacency over government revenues, despite the high level of oil prices at the moment, pointing out that the uncertainty in global demand and supply of crude oil, and weak performance of non-oil and VAT revenues must be augmented by earning from other sources.

He said the passage of the PIB would help attract fresh foreign investments into the sector with the attendant implications for its improved contributions to the GDP and other positive multiplier effects on the broad sectors of the economy.

On the MPR, the CBN Governor said the Committee opted to retain the rate at 12 per cent in view of the medium and long term effects on the economy. These include the need for prudence to hold and monitor developments between the current meeting and the next with a view to knowing whether an adjustment of the rate would be necessary in government’s efforts to ensure macro-economic stability in the country.