CBN Monetary Policy Decisions That Should Concern Us All, Rich, Poor

All Central Bank of Nigeria, (CBN) monetary policy decisions are important but there are certainly some that are more important than others.

These are the ones that may not be popular but have direct bearing on the welfare of the average man on the street.

This is especially the case now that the economy has become even harsher on the average Nigerian, the prevailing inflationary rate, and parlous exchange rate of the Naira, dealing heavy blows on individuals, households and corporate entities.

It is for this reason that the recent monetary policy decisions of the apex bank should be of interest to the average Nigerian.

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The Eagle reports that these monetary policy decisions were direct outcomes of The 29th  Monetary Policy Committee (MPC) meeting of the apex bank held on the 25th and 26th of March 2024.

The meeting had as main objectives, a consideration of the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability.

In plain terms, price stability and the containment of inflation to ensure that purchasing power

of ordinary Nigerians is restored in the short to medium term.

By the time, the meeting wound up, some much milestone had been achieved by way favourable monetary policy decisions.

Observing that domestic headline inflation rose further to 31.70 per cent in February 2024 from 29.90 per cent in January, it added that food inflation also accelerated to 37.92 per cent

from 35.41 per cent, while core inflation rose to 25.13 per cent from 23.59 per cent with the exchange rate, ; rising cost of transportation; high cost of energy and other production inputs; lingering insecurity, especially in food producing areas; and legacy infrastructure deficits

being the key drivers.

The committee therefore decided amongst others, to

1. Raise the MPR by 200 basis points to 24.75 per cent from 22.75 per cent.
2. Adjust the asymmetric corridor around the MPR to +100/-300 basis points
3. Retain the Cash Reserve Ratio of Deposit Money Banks at 45.0 per cent.
4. Adjust the Cash Reserve Ratio of Merchant Banks from 10.0 per cent to 14.0 per cent
5. Retain the Liquidity Ratio at 30.0 per cent

The communique issued at the end of the meeting observed that “Members noted the continued rise in headline inflation, driven largely by food prices because of supply shortages and high cost of logistics and distribution.

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“The Committee, therefore, was of the view that addressing food insecurity is  key to containing current inflationary pressures.

“On this note, Members commended the ongoing efforts of the Federal Government towards

addressing food insecurity, some of these measures include the provision of various palliatives, release of grains from the strategic reserves, distribution of seeds and fertilisers, as well as farm implements for dry season farming”.

That is not all, the Committee therefore called for the full implementation of the Federal Government’s agricultural policies and programmes to improve food supply and further advised for broader fiscal consolidation particularly on the improvements of tax collection and tax-to-GDP ratio.

Another of the monetary policy decisions worthy of mention, concerns ensuring stability in the foreign exchange market.

“The Committee noted with satisfaction the level of stability achieved”, and this, in the view of members reflects the impact of the Bank’s recent policy actions and reforms, as well as increased transparency in the market.

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“In addition, the Committee noted the efforts of the bank in offsetting verified foreign currency obligations, an action that will greatly enhance investor confidence and attract foreign investments to Nigeria.

“The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable”, but however, called on the CBN to sustain its surveillance and ensure compliance of banks with existing regulatory and macroprudential guidelines”.