The Central Bank of Nigeria (CBN)’s Monetary Policy Committee (MPC) Tuesday raised the Monetary Policy Rate (MPR), otherwise referred to as benchmark rate, by 200 basis points (bps) from 22.75 per cent to 24.75 per cent.
CBN Governor Olayemi Cardoso disclosed this at the 294th meeting of the Monetary Policy Committee (MPC) in Abuja.
He said the committee raised the interest rate by 200 basis points as part of efforts to tackle rising inflation.
The MPC had, February, raised the interest rate to 22.75 per cent.
The MPR is the baseline interest rate in an economy, and every other interest rate used within the economy is built on it.
The Apex Bank boss said MPC’s decision will ensure Nigeria’s rising inflation rate which currently stands at 31.70 per cent in February moderated.
Cardoso said: “The committee voted as follows: Raise the MPR by 400bps to 24.75 from 22.75 per cent. Increase the asymmetric corridor to +100bps/-300 basis points.
“Retain the Cash Reserve Ratio of Deposit Money Banks at 45 per cent and adjust the CRR of Merchant banks from 10 per cent to 14 per cent.”
…Unpaid FX backlogs
On the unpaid FX backlogs, Cardoso told journalists that the law enforcement agencies were investigating foreign exchange forwards valued at approximately $2.4 billion.
The CBN governor insisted that some of the transactions were deemed ineligible for payment.
According to him, after a forensic audit of the transactions, a lot of discrepancies were discovered rendering them invalid.
He said: “Apart from the fact that documentation was not satisfactory, in many cases they were out rightly illegal. The law enforcement agencies of course are now looking into those transactions that are as far as we are concerned, not valid to be paid.
“I will emphasise that if there is any information to the contrary, we will in due course consider that. But as of today, that is exactly where it stands and the law enforcement agencies are taking a very hard look at those transactions.
“Figure is about $2.4billion, and as I said, there are several cases, quite frankly that is from documentation and no Form M available or cases where allocations were made, and no request were requested or cases were requested were made and no naira was available.”
He said the Apex Bank would continue to focus on its core mandate of maintaining price stability and fighting inflation.
…Uwaleke on rates hike
In a chat with Blueprint, the Director Institute of Capital Market Studies at the Nasarawa State University, Professor Uche Uwaleke, said the move by the CBN would increase the pressure on the Apex Bank’s Standing Lending Facility(SLF).
“This development is now driving undue pressure by banks on the CBN’s Standing Lending Facility and increasing cost of funds generally.
“The CBN should recognise that the challenge currently facing the Nigerian economy is not just inflation but stagflation, and to this end should equally have regard to growth concerns in future meetings of the MPC,” Uwaleke said.
The former Imo finance commissioner also said: “Much as tightening is necessary at this time in view of elevated inflation, MPC should tighten policy incrementally and in a measured manner that optimises the CBN’s policy tool kit without undue reliance on the monetary policy rate.
“The decision by the MPC to increase the MPR by 200 bps makes it a total of 600 bps in just one month if one adds the 400 bps delivered in February.
“This is in addition to a very high CRR of 45% representing sterilised Bank deposits.”
…NACCIMA on FX challenge
Meanwhile, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) have expressed concerns over the clearing of the CBN forex backlog.
The CBN on 20 March announced it had cleared all valid foreign exchange backlogs.
However, in a statement by its National President, Dele Oye, NACCIMA urged the CBN to fast track the request by its members to enable them access foreign exchange.
The NACCIMA boss said many of its members have complained of their inability to access FX even after commitment by the CBN.
He said the lack of communication from banks or the CBN has left their business operations in uncertainty.
The statement said: “In February, NACCIMA as part of the Organized Private Sector of Nigeria (OPSN) sought the intervention of the Honourable Minister of Finance to address these issues, emphasizing the need for transparency and expedited resolution. Additionally, NACCIMA, along with NASSI and NASME with other associations, raised these concerns with the Minister of Industry, Trade, and Investment during a courtesy visit that same month.
“The gravity of the situation was acknowledged by the National Assembly, which led to a summoning of the Honourable Minister of Industry, Trade, and Investment to discuss the matter further.
“As part of the Hon Minister of Industry Trade and Investment’s preparation for the National Assembly Summons, a stakeholder meeting comprising of NACCIMA, MAN, affected banks and customers was convened by the Honourable Minister of Industry Trade and Investment at the Bank of Industry in Lagos on the21 March.
“At the meeting, it was gathered that there has been a lack of formal communication from the CBN regarding the rejection of foreign exchange bids. Furthermore, it was revealed that Deloitte, the consulting firm engaged by the CBN for verification purposes, had not directly engaged with the affected banks or their customers for clarification on any contentious transactions.”
The body appealed to the CBN to closely collaborate with the minister of industry, trade, and investment, as well as the banking sector and their clients, to resolve outstanding issues regarding legitimate letters of credit.
