The Governor of the Central bank of Nigeria says the country’s economic recovery could relapse if strong and bold monetary and fiscal policies are not activated to sustain it.
The apex bank Governor, Mr. Godwin Emefiele, said this at the end of the Monetary committee’s two-day meeting, in Abuja, Nigeria.
He said the economy is on a path to moderate recovery with a positive short- to medium-term outlook.
“The economy is on a path to moderate recovery with a positive short- to medium-term outlook, premised largely on fiscal stimulus and a stable naira exchange rate. Inflation expectations also appear sufficiently anchored with the current stance of monetary policy’
“Data from the National Bureau of Statistics (NBS) showed that the contraction in the economy moderated to 0.52 per cent in Q1 2017 from 1.30 per cent in Q4 2016. The data further revealed that fifteen economic activities recorded positive growth in Q1 2017, showing strong signs of recovery”. He explained
Mr. Emefiele expressed confidence that the 2017 budget would further strengthen the country’s growth.
“The Committee hopes that the implementation of the 2017 budget and the Economic Recovery & Growth Plan (ERGP) will further strengthen growth and stimulate employment” he expressed
“The committee expects that timely implementation of the 2017 budget, improved management of foreign exchange, as well as security gains across the country, especially in the Niger Delta and north-eastern axis, should be firmly anchored to enhance confidence and sustainability of economic recovery” he added
Mr. Emefiele however revealed that the committee expressed concern about the slow implementation of the 2017 budget as well as increasing fiscal deficit estimated at N2.51tn in the first half of 2017 and called on relevant authorities to ensure timely implementation, especially, of the capital portion, in order to realise the objectives of the Economic Recovery and Growth Plan and called for fiscal restraint to check the growing deficit.
Speaking on the monetary policy decision Mr. Emefiele said six of the eight members ptesent at the committee’s meeting voted to leave the rate unchanged at 14 per cent.
He explained that apart from the MPR, which was retained at 14 per cent, the committee also retained the Cash Reserves Ratio at 22.5 per cent, the Liquidity Ratio at 30 per cent; and the Asymmetric Window at +200 and -500 basis points around the MPR.
He further explained that the inflation rate, still has strong base effect on the monetary policy stance.
“The argument for holding is largely premised on the need to safeguard the stability achieved in the foreign exchange market, and to allow time for past policies to work through the economy. Specifically, the MPC considered the high banking system liquidity level; the need to continue to attract foreign investment inflow to support the foreign exchange market and economic activity; the expansive outlook for fiscal policy in the rest of the year; the prospective election related spending which could cause a jump in system liquidity, etc” he explained.