Excerpts from the Statement by the Central Bank of Nigeria:
The Committee noted with satisfaction, the performance of the economy in 2018, highlighting the achievements in key macroeconomic indicators in the face of global uncertainties and domestic challenges. In particular, it noted the stability in the exchange rate, stable accretion to external reserves, moderation in inflation and the low but gradual improvement in real GDP growth in the last six consecutive quarters commencing from Q2 2017. The MPC noted that given global economic conditions and the risk confronting emerging markets and developing economies in recent times, as well as the limited productive capacity of the economy, the managed float foreign exchange management regime of the CBN has delivered the most optimal results when compared with other emerging markets in recent times. Consequently, capital flows into the domestic economy has continued unabated after an initial lull.
Forecasts for key macroeconomic indicators in 2019 portend a positive outlook for the domestic economy. Output growth is expected to be driven by fiscal stimulus from increase in oil and non-oil receipts to support the Federal Government’s Economic Recovery and Growth Plan. The economy is projected to grow by 2.0 per cent by the IMF, 2.2 per cent by the World Bank and 2.28 per cent by the CBN. Key headwinds to these forecasts, however, are softening oil prices, persistent security challenges arising from insurgency in the North East and herdsmen attack in some parts of the country and perceived political risks associated with the 2019 general elections. The outlook for inflation in the first half of 2019 is mixed, with the expectation of an increase in the near-term before a gradual decline towards the mid-year. Inflation is expected to rise marginally amidst palpable tailwinds, which include increased spending preparatory to the 2019 general elections and continued disruptions to the food supply chain in the insurgency prone areas and herdsmen attack regions of the country.
In the light of the observed risk confronting the economy, including the global and domestic inflationary pressures, which have intensified the risk of currency depreciation, the MPC was of the view that a loosening option was very remote. Weighing the balance of its judgement on price stability conducive to growth, the MPC felt that tightening would result in the loss of the gains so far achieved, noting that this may drive the banks to reprice their assets; thus increasing the cost of credit as well as elevating credit risk in the economy. It will also worsen the position of non-performing loans of the banks. The Committee also felt that tightening would dampen investments and hamper improvements in output growth, given the already fragile growth performance so far achieved.
In summary, the MPC decided by a vote of all eleven (11) members to keep the policy parameters unchanged from their current levels.
1. Retain the MPR at 14 per cent;
2. Retain the asymmetric corridor of +200/-500 basis points around the MPR;
3. Retain the CRR at 22.5 per cent; and
4. Retain the Liquidity Ratio at 30 per cent.