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| CBN Governor, Mr. Godwin Emefiele |
The Monetary Policy Committee of the
Central Bank of Nigeria on Tuesday called on the Federal Government to
urgently evaluate the level of its domestic indebtedness and develop a
framework for settling these debts.
The committee, in a communique issued at
the end of its two-day meeting held at the headquarters of the CBN in
Abuja, warned that the huge government indebtedness to economic agents
had slowed down business activities.
In the communique, which was read by the
CBN Governor, Mr. Godwin Emefiele, the committee noted that the
development was not good for the economy as it was compromising the
integrity of the financial system.
While reiterating that monetary policy
alone could not address the current economic crisis, the CBN governor
noted that the committee called for an enrichment of fiscal and other
sector initiatives and interventions towards resolving the growth
challenges in the economy.
He said these interventions were vital in order to promptly revive confidence in the economy.
Emefiele said, “Members stressed the
need for a robust and more keenly coordinated macroeconomic policy
framework that would restart output growth, stimulate aggregate demand
and rein in inflation expectations.
“The MPC urged the Federal Government to
urgently assess the extent of its indebtedness to domestic economic
agents and develop a framework for securitising the debts in order to
settle its outstanding domestic contractual obligations, which cut
across all sectors of the economy.
“These accumulated debts have slowed the
business activities of economic agents, most of who are indebted to the
banking system, thus compromising the integrity of the financial
system. It also advised the bank (CBN) to commit to greater surveillance
and deployment of early warning systems in managing the banking
system.”
The CBN governor said the committee
called on security agencies to sustain their checks on the activities of
illegal foreign exchange operators in order to bring sanity to that
segment of the market.
He said, “The extant foreign exchange
regulation outlaws the trafficking of currency on the streets as some
unlicensed operators currently do.
“Thus, to evolve an appropriate naira
exchange rate that stabilises the foreign exchange market, Bureau De
Change operators must strictly observe the terms and conditions of their
licences.”
On whether the CBN was supporting jail
terms for people hoarding dollars, Emefiele said the apex bank would not
support any such move.
He said while the current foreign
exchange regulations of the CBN did not in any way support jail term for
people who hoard dollars, he was aware that the Nigerian Law Reform
Commission was working towards reviewing the regulations.
The apex bank boss, however, added that the CBN would not support any move to prescribe jail terms for people who hoard dollars.
He said, “Let me use this opportunity to
reiterate that it is not in our foreign exchange regulations that
people should be jailed or their dollars confiscated. But I am aware
because just today (Tuesday), I was told that the Nigerian Law Reform
Commission is looking at reviewing the exchange regulations, just like
it normally will from time to time depending on the exigency of the
time.
“We have not been contacted regarding
whether or not some of the clauses that are involved are included in the
review to be conducted by the Law Reform Commission.
“But I am saying here categorically that
if we are contacted, or whenever it becomes an issue for discussion, we
will advise against a clause that forbids people from keeping their
dollars if they chose to, or a law that says people should be jailed for
keeping foreign currencies.”
When asked if the apex bank was
concerned about some of the risks facing the banking system owing to the
current economic crisis, the CBN governor admitted that while all
players in the financial system were facing “tremendous risks,” the
central bank would ensure that they would not crystalise to a point
where depositors’ funds would be lost.
He said, “As a result of the current
challenges being faced by the global economy, all agents in the
financial system, such as banks and other players, are facing tremendous
risks.
“When there is a slowdown or recession,
naturally banks will face certain risks such as non-performing loans
rising and different other risks, and this imposes on the regulator a
greater challenge to ensure that it strengthens its prudential
guidelines to ensure that the banks and particularly depositors are
protected.
“Nigerian banks, like other banks in
other climes, are facing risks. But those risks are surmountable, and
the central bank is doing all its best to ensure those risks don’t
crystalise to a point where we will begin to talk about depositors
losing their deposits. So for that reason, the rumour about banking
sector risks is overtly elevated.”
On whether the apex bank was considering
reducing the number of BDC operators so as to better regulate their
activities, the governor said the CBN might consider that option at the
appropriate time.
He said, “We believe that everybody
(BDC) is entitled (to have a licence) once the regulations are set;
there is no need to preclude you if you meet the conditions. But of
course, naturally, the regulator, which is the CBN, has a right to put
in place policies that limit entry. If we want to limit entry, we know
what to do.
“I can assure you we will do it anytime
we decide to limit entry or even exacerbate exit from the market, and
that is something we will look into at the appropriate time.”
On the foreign exchange inflow through
the CBN, the governor said the country recorded a decline of $447.5m or
31.85 per cent from $1.4bn in September to $957.37m in October.
He attributed the decrease to lower
crude oil and other government revenues in the period under review,
lamenting that despite the resumed Joint Venture payments in October,
the total outflows also continued to decrease.
Foreign exchange outflows, according to him, dropped significantly by 58.68 per cent from $2.25bn to $1.01bn during the period.
Emefiele said the committee implored the
CBN to continue to direct more focus at making foreign exchange
available to the agriculture and manufacturing sectors of the economy.
This, according to him, can be achieved
by enforcing its policy directing Deposit Money Banks to allocate 60 per
cent of the available foreign exchange to these sectors.
On the Monetary Policy Rate, the CBN governor said the committee decided to leave it unchanged at 14 per cent.
He explained that all the 10 members who attended the MPC meeting agreed to maintain the current monetary policy stance.
Apart from the MPR that was retained at
14 per cent, the governor said the committee also voted to retain the
Cash Reserves Ratio at 22.5 per cent.
Also retained were the liquidity ratio,
which was left at 30 per cent; and the asymmetric window, which was left
at +200 and -500 basis points around the MPR.
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