Leadership (Abuja)
Justus Nduwugwe
2 April 2008
The Central Bank of Nigeria (CBN) has revealed that the gross official reserves amounted to $59.70 billion as at March 31, 2008, a level that could support 38 months of current foreign exchange transactions.
This is coming against the backdrop of the Monetary Policy Committee's decision to raise the Monetary Policy Rate (MPR) by 50 basis points from 9.5 to 10 per cent.
This is aimed at stemming the potential impact on liquidity of the recent distribution of $2.008 billion excess crude oil revenue and the second round distribution of same amount scheduled for June 2008.
These were made known yesterday by the governor of CBN, Professor Chukwuma Soludo, while reading the communiqué No. 55 issued at the end of the meeting of the Monetary Policy Committee held in Abuja.
According to the governor, "The MPC noted that the staff estimates indicate that inflation could remain within single-digit through the third quarter of the year if necessary actions are taken. In this regard, the committee emphasized that the release of grains from the strategic grains reserve, together with restrictive monetary policy, would be important elements in keeping inflation under control in the months ahead.
"In the light of the uncertainties mentioned above, the committee decided to raise the MPR by 50 basis points from 9.5 per cent to 10.0 per cent; issue treasury bills for liquidity management and increase the sale of foreign exchange as the need arises."
He earlier noted that the committee discussed the international economic and financial situation along with a detailed review of the domestic macroeconomic developments including the implementation of the fiscal, monetary and exchange rate policies in the first quarter of 2008 and the outlook for the next two quarters.
"It considered the implications of the credit conditions in the global financial markets, the recent policy initiatives of the fiscal and monetary authorities in the major industrial countries, and the likely spill-over effects of the expected economic downturn in the world's largest economy, for the Nigerian economy," he further revealed.
Prof Soludo also said the MPC noted that while the domestic macroeconomic environment was generally stable in the first three months of 2008, there are many uncertainties.
"The committee observed that the current rate of inflation is a matter of concern," he stressed.
The committee, however, expressed satisfaction over the overall stability in the government securities, money and foreign exchange markets, the buoyancy of the equity market and the accretion to foreign reserves.
It restated its commitment to sustaining monetary and price stability through the pursuit of appropriate monetary and exchange rate policies.
On inflation, the committee noted that the year-on-year (headline) inflation rose from 6.6 per cent at end-December 2007 to 8.6 per cent in January but fell to 8.0 per cent in February 2008.
"The higher levels of the headline inflation in January and February, relative to that of December 2007, were mainly attributable to the increase in food prices," the communiqué also stated.
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