Prepare for hard times, CBN tells Nigerians

Governor of the Central Bank of Nigeria, Godwin Emefiele has urged Nigerians to brace up for the current economic realities as government would be forced to adopt some hard economic policies in line with the harsh economic environment as a result of low oil prices in the international market. The CBN boss stated this yesterday during a press briefing at the bi-monthly Monetary Policy, MPC meeting in Abuja. According to him, 


“It is imperative to brace up for a longer period of low government revenues from oil sources, which would necessitate hard and uncomfortable choices as the economy transits to more sustainable sources of revenue, consistent with the economic realities and strategic objectives of the country. In the circumstance, certain tradeoffs must be envisaged and duly accommodated. “In view of the foregoing, the imperative for consistently sound and coordinated macroeconomic policy has become inevitable. In the medium term within which monetary policy is cast, the need to allow policy to produce the desired outcomes becomes a key consideration in the policy mix.” 

He said that in consideration of the headwinds in the domestic economy and the uncertainties in the global environment, the Committee decided by a unanimous vote to retain the Monetary Policy Rate, MPR at 11.0 per cent; the CRR at 20.0 per cent; Liquidity Ratio at 30 per cent; the asymmetric corridor at +200 basis points and -700 basis points. Governor Emefiele said the Committee observed that the current episode of lower oil prices is projected to remain over a very long period. Consequently, the Bank is fine-tuning the framework for foreign exchange management with a view to ensuring a more effective and liquid foreign exchange market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies. Speaking on whether Nigerians should expect naira devaluation, 

Emefiele said that the country would maintain the status quo for now. “I can’t answer that question at this time but the only answer I can give to you is that we are already working on different scenarios, the models are being worked on, we have them, and we will look at them as much as possible. 

“We will look at scenarios under different crude prices. And we will continue at management and monetary Policy committee. We will continue as much as possible to continue to share our thoughts with the fiscal authorities with a view to harmonising our positions to ensure that notwithstanding the drop in crude prices that we are able to continue to run government and continue to do business. 

“So far, we have seen this now for almost about 14 months and there is no green light yet at and end of the tunnel. We will continue to be alive to our responsibilities to continue to ensure that both monetary and fiscal authorities work together towards ensuring that we provide for all the needs of Nigerians. But, again I had to appeal that yes, some of these actions and policies may be painful but they are being taken for the good of our people.” 

He said the MPC also emphasized the necessity of coordination between monetary and fiscal policies as a prerequisite for resolving the nation’s economic problems, particularly, steering the economy away from oil dependency “In particular, the Committee stressed the need for the fiscal authorities to compliment the Bank’s low interest rate policy orientation by properly coordinating its borrowing activities (and rates) with the Bank in order to push the common objective of stimulating banking system credit delivery at low interest rates to the key sectors of the Nigerian economy. 

It noted that given the current economic reality of dwindling oil revenue and the rather unclear outlook for commodity prices, there would be need for a recalibration of the fiscal strategy to increasingly explore opportunities in non-oil tax revenue,” he said. 

Emefiele said Nigeria foreign reserve stood at $ 28billion. On the provision of foreign exchange to BDC he said the CBN will not continue to support the need of the BDC market. “Nigeria is the only country in the world where the CBN provide cash to meet the need if of BDC, We saw a scenario where the number of BDC rose from 74 in 2005 to almost 2800. But we will continue to work and encourage them to get license to operate in Nigeria, we will continue to assist them so that they can source for their foreign exchange themselves from the autonomous market.”