The Committee also kept the cash reserves requirement on public sector deposits at 75 percent and the cash reserves requirement on private sector at 15 percent. The monetary policy rate corridor was retained at +/- 200 basis points and the liquidity ratio was kept at 30 percent.
Excerpts from the statement by the Central Bank of Nigeria:
The Committee was satisfied with the relative stability in the macroeconomy as reflected in the impressive growth rates, stable consumer prices and exchange rate as well as increased external reserves. It was however concerned about the weak translation of stability to microeconomic gains in employment and access to finance especially by small and medium scale businesses. It, therefore, emphasized the need for the MPC decisions to take into account the long run impact on employment level, wealth creation and growth of businesses.
The Committee noted the potential of the power sector to stimulate output growth through enhanced investment and the spill-over effect in employment generation if the challenges confronting the sector are effectively and appropriately addressed. Specifically, it noted that gas-to-power has remained a binding constraint in reaping the benefits of the recently-concluded power sector reforms; urging for the collective efforts of government, private investors and the banks to resolve. Other pressure points include the underlying pressure from food/core inflation and the risks that could emanate from the likely increase in aggregate spending in the run up to the 2015 general elections. The Committee was also concerned about the implications of the on-going QE3 tapering for inflows and external reserves. The Committee recognized the necessity of sustaining a stable naira exchange even as it has to deal with the delicate balancing of the need for a low interest rate regime. The Committee noted that portfolio flows were not employment generating but were essential in the absence of adequate fiscal buffers.
The Committee welcomed the moderation in the rate of depletion in external reserves in recent months, noting that reserves accretion needed to improve much faster to provide a strong and more resilient buffer to fiscal operations. The Committee, however, noted that a gradual reduction in the country’s import bills through domestic production of some of the major food imports should be a key element in the overall reserves accretion strategy. It welcomed the decision of the Bank to collaborate with other stakeholders in this regard.
The Committee further expressed concern about the liquidity level and the trending uptick in inflation which may not be unconnected with the poor harvest in some agricultural producing areas, particularly in the north eastern and central states of the country. It however, noted that other reform measures could dampen food prices in the short to medium term and restore inflation to a sustainable long-run path. Overall, the Committee noted that the policy direction of inflation, exchange rate and interest rate must be seen not only in the context of price and financial stability but also in enhancing the quality of life of Nigerians and promoting employment generation.