Home Community Insights CBN Retains Interest Rate At 11.5%, Rues Alarming Rate of Crude Oil Theft in Nigeria

CBN Retains Interest Rate At 11.5%, Rues Alarming Rate of Crude Oil Theft in Nigeria

CBN Retains Interest Rate At 11.5%, Rues Alarming Rate of Crude Oil Theft in Nigeria

The Central Bank of Nigeria (CBN), during the Monetary Policy Committee (MPC) meeting held on Monday, in Abuja, resolved to retain the Monetary Policy Rate (MPR) at 11.5% with the asymmetric corridor of +100/-700 basis points around the MPR, ThisDay reports.

MPR is the rate at which the CBN lends to commercial banks and it often determines the cost of borrowing in the economy.

The MPC also voted to maintain CRR at 27.5 percent as well as the Liquidity Ratio at 30 per cent.

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The CBN governor said six out of the 10 MPC members present voted to retain monetary parameters, adding that while loosening could trigger liquidity surfeit in the system, a tightening stance would impact the fragile recovery of the economy, reverse credit expansion and yet, fall short of taming inflation.

Emefiele, who read the committee’s communiqué, lamented about the impact of rising oil prices and the current fuel scarcity rocking the nation, which he acknowledged has compounded Nigeria’s economic struggle.

He said the unprecedented rate of oil theft recorded in recent times has debilitating effect on government revenue and accretion to reserves, echoing the lamentations of other notable Nigerians such as the co-founder and former Chief Executive Officer of Seplat Energy Plc, Mr. Austin Avuru, and Chairman Heirs Holdings, Mr. Tony Elumelu, who decried the alarming rate of oil theft in the country.

The CBN also expressed optimism that in the medium term, the proposed take-off of the Dangote refinery this year, would help to improve the supply of petroleum products in the country.

Emefiele said the CBN remained optimistic that food prices would trend downwards in 2022 as security agencies sustain efforts to subdue the activities of bandits so as to allow farmers back to their farmers.

“And now what we are saying is that if farmers are able to access their farms, do they have the wherewithal to procure the inputs, seeds, fertilizer and other inputs with which they can go back to the farm and farm? We are making all those available. And that is why we still remain reasonably optimistic that food prices would moderate in 2022,” he said.

He said the MPC further noted with concern the effect, which the global price increase in petroleum and other products was having on all economies. He pointed out that this had resulted in imported inflation on the Nigerian economy.

The committee believed that specific actions were required to ensure that the trend did not continue, given the adverse consequences and aggressive rising price level could have on the cost of living and purchasing power of Nigerians.

Emefiele noted that before the Russia-Ukraine war, the MPC was optimistic that the moderate decline in inflation was sustainable due to the positive impact of good harvest on price levels. But it expressed worry that, whereas global prices had gone up, this had been compounded by the shortage of supply of petroleum products.

He added that the rising price of diesel had been compounded by the inadequate electricity supply, which has adversely impacted domestic prices.

The MPC, however, advised the CBN and the fiscal authorities to take specific and urgent actions to avoid many power generating stations shutdown for turn-around maintenance, resulting in the current unwarranted shutdown of generating assets.

The CBN said the committee was, nonetheless, relieved that food inflation declined marginally due to good harvest.

“Although some scarcity is expected as we approach the planting season, the committee is optimistic that with the high level of strategic grain reserves of the CBN, it is relieved that food prices would remain relatively moderated,” Emefiele added.

The committee further advised the apex bank to redouble its development finance initiatives aimed at boosting domestic food output, which would help in moderating food inflation going forward, thereby moderating headline inflation.

On the global scene, the committee noted with concern the recent heightening of uncertainties confronting the recovery of the global economy as the Russia-Ukraine conflict and numerous sanctions against Russia, introduced a new dimension of risk to the tepid recovery of the global economy.

Among other things, the committee took into cognizance the lingering headwinds associated with the COVID-19 pandemic and global supply chain constraints, rising inflationary pressure, and more recently, the progression of an interest rate hike by the US Federal Reserve Bank and Bank of England (BOE).

Members noted that the on-going war and the resultant sanctions against Russia will continue to have a considerable impact on the global supply chain as both countries are major players in the global commodities market.

Emefiele said global financial conditions were thus expected to tighten in the short-term as the investment horizon gradually becomes clearer, adding that this is expected to impact capital flows to emerging market economies as risk-averse portfolio investors adopt a wait-and-see approach.

He said the risks to the overall recovery of the global economy remained heightened and called for cautious policy maneuvering to avoid a sharp downturn, such as experienced in 2020.

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