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The Monetary Policy Committee (MPC) of the CBN met on the 19th of September 2011 to review the current domestic and international economic and financial developments, including challenges facing the Nigerian economy in the near term. At the conclusion of the meeting, the MPC raised the benchmark rate by 50bps to 9.25% and maintained the CRR at 4.0%.
Here is an excerpts from the meeting communique:
The Monetary Policy Committee of the Central Bank of Nigeria met for their regular meeting on July 25th and 26th 2011. The 3 major decisions made were:
1. To tighten monetary policy by a majority decision of 10 to 2.
2. To raise the MPR by 75 basis points from 8.0 per cent to 8.75 per cent by a majority vote of 8 members in its favour, 1 member favoured 50 basispoint increase while 3 members voted for holding the MPR at 8.0 per cent.
3. To maintain the corridor at +/- 200 basis points around the MPR.
Below is the summary from the communique of the meeting:
The Monetary Policy Committee (MPC) met on 25th and 26th July, 2011 to review domestic economic conditions during the first half of 2011 and the challenges facing the Nigerian economy against the backdrop of developments in the international economic and financial environment in order to chart the course of monetary policy in the second half of the year.
On the global scene, the Committee noted with concern the enormity of the challenges being faced by the US and euro zone countries as well as the major emerging market economies such as the fiscal position of Brazil, possible real estate bubbles in China and seemingly intractable inflation in India, which may impact the Nigerian economy adversely through several channels. The economic slowdown and the commodity price inflation in the international economy as well as the rapid increase in prices of some asset classes in some emerging market economies remain serious threats to the global economic recovery. There are continuing widespread threats of inflationary pressures fuelled by the sustained high energy, commodity and food prices in the global economy. Headline inflation in many of the major emerging market economies is now exceeding 6 per cent and is running close to or above central banks’ targets in a number of other larger economies.
The performance of the global financial markets was mixed. Many national currencies in Africa depreciated against the US dollar while in many emerging markets, currencies appreciated vis-à-vis the US dollar during the first half of 2011. Furthermore, most stock markets around the world showed weak recovery during the period due to high inflation, weakening consumer confidence and government finances, particularly in the US and eurozone. The unfolding debt crises in the European periphery could damage confidence and output in the near-term while the US debt and unemployment situation pose grave danger to the international economy given the reserve currency role of the US dollar and the size of the US economy. It is not unlikely that the US will lose its AAA rating and actual default is possible unless a deal can be worked out between the White house and the Congress.
On the domestic scene, the Committee noted that inflationary pressures which were traceable to the high expenditure levels associated with the April 2011 general elections as well as the effects of rising international energy, commodity and food prices had moderated by June 2011. This development was due in part to the tight monetary policy stance of the Bank since September of 2010. However, the Committee observed that the inflation outlook appears uncertain owing to the expected implementation of the new national minimum wage policy and the imminent deregulation of petroleum prices.
Significant injection of liquidity from FAAC in the third quarter coupled with the impact of AMCON recapitalizing intervened banks to the tune of N1.6 trillion will both add to inflationary pressures. The Committee welcomed the favorable growth projections but cautioned that the current security challenges, infrastructural bottlenecks and the uncertainty in the international economy as well as fiscal developments could undermine investors’ confidence and output growth in the near term.
The Committee expressed serious concerns about the continued sluggish growth of credit to the private sector during the first half of the year which is attributed, among other factors, to the heightened credit risk in the real economy as a result of the persisting structural problems occasioned by the inadequate power supply and critical infrastructure deficit. It also observed that the lending rates of deposit money banks (DMBs) remained relatively high.
You can download the full communique below:MPC JULY COMMUNIQUE NO 77 (276)
And here is the communique from the June meeting:CBN - MPC Communique No 76 Issued on May 24 2011 (275)
Before the July 25th and 26th meeting, Afrinvest, Access Bank, and Vetiva had released preview documents of the Central Bank’s decision, you can read them below:Monetary Policy Committee Decision Preview - July 2011 - Vetiva (307)
Last Friday,the licenses for Afribank, Bank PHB, and Spring Bank were revoked and their assets and liabilities have been transferred to the newly incorporated Bridge Banks:
1. Mainstreet Bank Limited has assumed the assets and liabilities of Afribank Nigeria Plc.
2. Keystone Bank Limited has assumed the assets and liabilities of Bank PHB Plc.
3. Enterprise Bank Limited has assumed the assets and liabilities of Spring Bank Plc.
Below are 2 speeches given by the CBN Governor at Igbinedion University and Tafawa Balewa University respectively. One is on the growth prospects of the Nigerian Economy and the other on the impact of the global financial meltdown on the Nigerian banking sector.
The minutes from the just concluded meeting of the Central Bank’s monthly Monetary Policy Committee meeting has been released. The excerpts are below:
In the light of the above considerations, the Committee is committed to maintaining price stability by pursuing the current policy thrust of monetary tightening in view of the perceived inflation risks in the near term. The Committee took the decision to further tighten monetary policy. This was a decision taken by a majority of 11:1. The following measures were approved:
1. Raise the MPR by 25 basis points from 6.25 per cent to 6.50 per cent with immediate effect (a majority vote of 11:1);
2. Maintain the symmetric corridor of +/- 200 basis points by 7-5; 4 members voted for asymmetric corridor by 50 basis points increase in Standing Deposit Facility rate;
3. Raise the Cash Reserve Requirement (CRR) Ratio by 100 basis points from 1.00 per cent to 2.00 per cent with effect from February 1, 2011 with a majority vote of 11:1; and
4. With effect from March 1, 2011, raise the Liquidity Ratio (LR) by 500 basis points from 25.00 per cent to 30.00 per cent with a majority vote of 11:1.</blockquote>
And you can download the full minutes below.
As you know, the Monthly Economic Reports from CBN are usually a few months behind. The Economic Report for August 2010 was recently released. Here is the excerpt from the summary. You can also download the full report below: Growth in the key monetary aggregate accelerated in August 2010 relative to the level in the [...]
Here is the CBN Annual Report And Statement of Accounts For Year Ended Dec 31st 2009. It provides information on the corporate activities of the Central Bank and the monetary policy and surveillance activities and operations of the bank. The second part of the report includes reports on the global economy and the Nigerian economy with a particular emphasis on the financial sector.CBN 2009 Annual Report (904)
The Monetary Policy Committee of the Central Bank of Nigeria held their regular meeting on November 22nd and 23rd. The key decisions were:
1. To Retain the Monetary policy Rate (MPR) at 6.25 per cent.
2. To adjust the corridor to +/- 200 basis points, implying Standing Lending Facility (SLF) rate of 8.25 per cent, and Standing Deposit Facility (SDF) rate of 4.25 per cent.
3. Maintain the policy stance of a stable exchange rate.
4. Continue to monitor inflationary trends with a view to taking appropriate steps as and when necessary.
5. On the stance of monetary policy in the year ahead, the Committee reaffirmed that monetary policy would seek to exert pressure on aggregate demand, thereby helping to lower inflation expectations.
The report is below:
In recent weeks, the CBN has released some press releases and statements and guidelines. You can read them below as well as the recent speech by the CBN Governor at the CIBN Conference.Communique for September 21 MPC (252)
The Asset Management Corporation (AMCON) Bill was <a href=”http://www.bloomberg.com/news/2010-07-19/nigeria-president-goodluck-jonathan-signs-asset-management-corporation-law.html”>signed into law on July 19th</a>. You can call it the “Bad Bank Bill”. It will create the company (AMCON) that will buy the bad debt from the banks. The hope is that it will stimulate bank lending and ensure the health of the banks.
Here is <a href=”http://www.cenbank.org/”>CBN</a>’s press release after the bill was signed:
<a href=”http://www.cenbank.org/Out/2010/pressrelease/gov/PRESIDENT%20GOODLUCK%20JONATHAN%20SIGNS%20AMCON%20BILL.pdf”>CBN Press Release On The Signing Of The AMCON Bill</a>
<a href=”http://drop.io/hidden/ahltwvu68gm7ccy/asset/dmV0aXZhYmFua2luZ3VwZGF0ZWFtY29ubmlnZXJpYXMtYmFkYmFuay1wZGY%253D”>Vetiva Banking Update – July 2010 – Analysis Of Bad Bank Bill</a>
The Monetary Policy Committee of the CBN held their monthly meeting on April 15th. Afrinvest prepared an analysis of this communique. Read below and you can also download the report below too.
1. MPR is still retained at 6.0%, with an asymmetric corridor of +2.0% and -5.0%;
2. Technical Committee’s recommendations on the injection of the N500.0bn financing facility for the emergency power projects for industrial clusters, as well as modalities regarding the refinancing/ restructuring of banks’ exposures to the manufacturing sector and SMEs approved;
3. Banks required to submit their risk-based interest rate pricing models on a monthly basis. Loan pricing should henceforth be stated at a fixed spread above MPR and adjusted along with MPR movements;
4. Complementary policies being put in place by the CBN Board endorsed, including the revised guidelines for loan loss provisioning, the N200.0bn guarantee for real sector lending and regulations governing margin lending;
5. CBN to continue its efforts towards the expedited passage of the AMCON Bill and its speedy implementation.
Key Domestic Macroeconomic Statistics
Provisional data from the National Bureau of Statistics (NBS) show that in Q1 2010, real Gross Domestic Product (GDP) grew by 6.68%, largely driven by the non-oil sector. Overall GDP for 2010 is however projected at 7.53%, with the non-oil sector still expected to be the main driver.
The year-on-year inflation fell to 11.8% in March 2010, from 12.3% in February 2010. This could be attributed to numerous factors, including the on-going money contraction, delays in the passage of the 2010 federal budget and the improvement in the supply of petroleum products.
The MPC re-stated its position that the risk of inflationary pressure in the near-to-medium term remains real; it however asserted that it will continue to monitor price developments to facilitate an enabling environment for sustainable growth and employment.
Afrinvest Research re-iterates its position that the N500.0bn facility for emergency power projects is a step in the right direction. We also believe that the ongoing review of regulations governing margin lending as well as prudential guidelines on loan loss provisioning will improve transparency and corporate governance in the banking sector. It will also help the banks to more efficiently hedge against risks.
Retail lending rates have remained stubbornly high despite the significant fall in interbank rates, deposit rates and the Standard Deposit Facility rate. This has therefore resulted in a wide spread between lending and deposit rates. Banks are still unwilling to lend to the real sector, given their rather reticent approach to the creation of new risk assets. The MPC is therefore trying to establish a proper transmission mechanism from policy rate adjustments to market (interest) rates and, hopefully, channel funds from the banks to the real sector.
Afrinvest Research is of the opinion that though banks may still be unwilling to resume lending, they will however be forced to do so over time as they come under increasing pressure from a number of angles; coupled with recent CBN measures taken to encourage lending, shareholders would also begin to press for better returns than what currently obtains (deposits with the CBN at a low rate and money market securities with low yields), thus mounting pressure on the banks to resume lending. We also believe that the sector will witness even more intense competition amongst operators, which would naturally force them to resume lending as they fight for turf.Central Bank of Nigeria Communiqué No. 69 (213)
The last meeting of the Monetary Policy Committee of the CBN was held on March 1st – 2nd. Here is the excerpt from the communique on the key decisions made:
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