Nigeria's central bank kept its benchmark Monetary Policy Rate (MPR) steady at 12 percent, as expected, but raised the Cash Reserve Requirement (CRR) by 300 basis points to 12 percent from 8.0 percent in an attempt to reduce liquidity in the banking system.
In its statement, the central bank said significant cash on the books of banks had not lead to increased lending to the private sector but instead banks had taken advantage of the high yields on Nigerian government bonds and used the funds to speculate in the foreign exchange market.
By raising the cash reserve requirement but keeping the rate steady, the bank said it was choosing "a policy trajectory that would have the least negative impact on the wider economy."
Nigeria's central bank, which has kept its policy rate unchanged since October 2011, also reduced its net open foreign exchange position (NOP) to 1 percent from 3 percent to support the naira.
"…the ominous signs for the domestic economy are evident," the Central Bank of Nigeria said, noting the weaker global economic outlook, lower demand for crude oil -- Nigeria is Africa's largest oil exporter -- a buildup in inflationary pressures and possible shortfall in projected 2012 revenue.
Nigeria's inflation rate rose to 12.9 percent in June from 12.7 percent and the bank expects domestic inflation to maintain its upward trend over the next six months due to higher tariffs on electricity and some imported goods. The central bank targets inflation of 10 percent.
The bank said a logical response to the inflationary pressures would be to raise the MPR, but the bank was "conscious of the impact of higher interest rates on small
businesses and the potential for higher non-performing loans
on the books of banks. In addition, it is important to leave room and flexibility for further tightening should conditions so
warrant in the near future."On the other hand, a lowering of the interest rate to counter slowing global growth could weaken the naira and affect currency reserves, which have been depleted following a nationwide strike in January, the bank said.
www.CentralBankNews.info
0 comments:
Post a Comment