According to the Central Bank of Nigeria (CBN), the decision to raise the monetary policy rate MPR) was made in an effort to rein in inflation that was out of control
CBN’s Director, Monetary Policy Department, Hassan Mahmoud, said this on Wednesday at a post-MPC briefing tagged: “Unveiling Facts behind the Figures’’.
The MPC, in its 287th meeting on Tuesday, had increased the MPR by 150 basis points, from 14% to 15.5%.
The MPR is the baseline interest rate in an economy on which other interest rates within that economy are built on.
The decision, according to CBN Governor Godwin Emefiele, was motivated by the economy’s shaky growth and the inflation rate’s ongoing rise.
Mahmud claims that the MPC has reached a point where drastic action is required to rein in inflation.
He said that in making its policy decisions, the committee considered both local and global economic concerns.
“We raised the MPR because it is necessary to do so. The quantity of money in the system was too much for the economy to absorb,’’ he said.
He added that the purpose of using monetary policy tools to address short-term risks was to raise the cost of borrowing in order to lower inflation.
Mahmud asserts that the COVID-19 stimulus measures implemented by governments worldwide enhanced peoples’ purchasing power and posed problems for the world supply.
“A lot of households and small businesses were injected with stimuluses; the US did two trillion dollars, Nigeria did about five trillion Naira, these increased the ability of people to spend.
“But the supply side could not meet up with the demand because that volume of injection was far more than the regular intake for those economies, this made prices to go up,’’ he said.
He also blamed the Russian-Ukraine war, as well as the resurgence of COVID-19 in China as responsible for rise in global inflationary trend.
“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply.
“The war resulted to some shortages which made prices to go up.
“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he said.
Dr. Yusuf Yila, director of the development finance department, claimed that around nine trillion Naira had been invested in the various development finance interventions when discussing the numerous economic intervention measures by the apex bank and the likelihood of recovering the monies.
However, he assured them that every penny would be recovered.
Various development financing initiatives totalled N9.3 trillion, of which N3.7 trillion has been reimbursed, according to Yila.
“Most of the loans are still under moratorium, especially those in manufacturing. Manufacturing forms the largest part of our portfolio, about 31 per cent,’’ he said.
However, he said that the Commercial Agriculture Credit Scheme, which had repaid almost N700 billion of the N800 billion that had been lent, was one of the best-performing measures.
Yila said that N400 billion has so far been recovered from the flagship agriculture intervention programme, the Anchor Borrowers Programme, which has lent out N1 trillion to smallholder farmers.
He claims that the department will initially limit action to crucial industries like SMEs and the electrical sector.
The Director of Trade and Exchange Department, Mrs. Ozoemena Nnaji, said the apex bank was taking measures to firm up the currency in response to the depreciation of the Naira.
Nnaji said that demand for foreign exchange outstripped supply currency, adding that the CBN was doing a lot to mop up supply.
“One of the steps is the Naira for dollar remittance drive, which has resulted to a huge increase in diaspora remittances.
“There is also the RT200 bringing in forex. Repatriation has gone up from 20 million dollars in the first quarter to about 600 million dollars in the second quarter.
“In this third quarter we are looking at more than one billion dollars of repatriated inflows,’’ she said.