Abuja — The Central Bank of Nigeria (CBN) Monday, for the eighth time in a row, resolved to leave the monetary policy rate (MPR), otherwise known as interest rate at unchanged at 12 per cent with a corridor of +/-200 basis points.
It also left banks' Cash Reserve Ratio (CRR) unchanged at 12 per cent and retained the Liquidity Ratio at 30 per cent.
The retention of the MPR, which is the rate at which the apex bank lends to commercial banks is bound to disappoint businesses, particularly the Small and Medium Enterprises (SMEs) which have long craved for a down review of the already high interest rate charge by commercial banks.
Addressing journalists yesterday after the maiden Monetary Policy Committee (MPC) meeting in the year, CBN Governor, Mallam Sanusi Lamiso Sanusi, said eight members of the committee voted to retain the MPR at 12 per cent while two members favoured a reduction of the MPR by 25 basis points.
Citing inflationary concerns as well as continued uncertainty in the global economy, Sanusi, who read the committee's communique, said leaving the interest rate unchanged was considered "just about right" given the stability achieved last years with year-on-year headline inflation rate at 12.24 per cent.
It also emerged yesterday that the External Reserves had increased to about $43.8bn as at the end of December, representing an increase of $1.682 billion or 3.98 per cent from its level of $42.167 billion as at the end of October last year.
However, reacting to suggestions that the time was ripe for a downward review of the MPR given some marked improvement in foreign reserve accretion among others, the apex bank boss said that could not be achieve at a time when inflation is still on the high side.
Sanusi said: "You cannot have low interest rate in a high inflation regime-and our ability to bring down rates is a function of our ability to do that and maintain price stability. We should not under estimate the impact of instability on the SMEs. The second thing is that question of access to finance goes beyond the rates of interest. There are many other costs; you got power, you've got infrastructure, security and access to markets. It doesn't make sense to blame high interest rates for SMEs not getting access to credit."
According to him: "In the last one year, we've kept inflation in check despite global and local turbulence; we have kept exchange rates stable despite social insecurity and uncertain global environment; we've built up reserves and the stock market is recovering. We do not want to take that for granted.
"And while we do understand that everyone wants rates to come down, the government wants rates to come down; but the central bank is here primarily to provide stability and we would continue to maintain rates at whatever level we consider consistent with our price stability mandate".
Further justifying the retention, Sanusi said: "Inflation is about 12 per cent and MPR is 12 per cent which is just about right; core-inflation have averaged 12 per cent but we do expect in January to see a moderation in inflation largely because of base effects of the fuel subsidy removal in January this year. We would see what inflation is in January, February and March before the next MPC meeting and we would look at the outlook in the international environment and we would decide."
He said: "I can't tell you when rates would come down because I don't know but we would like to see them come down and we do hope that we would succeed in bringing down inflation sufficiently to be able to lower rates of interest."
Also, yesterday, the apex regulatory bank's boss gave some reasons why it decided recently, to revoke the operating licenses of 200 Bureau De-change (BDC)operators.
According to Sanusi: "We revoke licences when the operator does not meet the conditions of the license. And there were a number of conditions: a lot of them didn't meet the mandatory deposits payments and a number of them we found have closed since and we didn't seem to find their addresses. For each of them there was a reason and each of them knows the reason why their license were revoked."
Sanusi, also, reaffirmed the apex bank's determination to effectively regulate dollar transactions in the country.
He said: "We are very much committed to the de-dollarisation of the economy. But before we stop the import and sales of cashed dollars we have to provide alternatives; so we are looking at a number of options including partnering with companies to make sure people begin to use cards and laod whatever they want on cards. We are also going to make sure that for all these expenses for education, for health, people make electronic transfers...you remember we wanted to have the N5000 notes which would have helped with the movement of large amounts but that has been stopped so that sets us back a little bit but we are working on a policy and guidelines would come out."
Sanusi said: "We simply think there's no need in this economy for people to be transacting in dollar-cash and we would like to ensure that when you purchase dollars-it's for transactions outside Nigeria and then we would find a way of getting it out."
Sanusi said the committee had noted that the oil price benchmark for the 2013 budget, which was hiked from $75 to $79 may constitute a downside risk to inflation.
He, warned however, that the CBN would "respond appropriately" should panic spending in the year lead to inflationary pressures.
Moreover, he said the committee, also observed the slow progress made in the resolution of the Euro zone crises could be transient as the recession had not been completely averted in the near term.
He said the domestic economy could still be susceptible to the adverse impact of significant decline in the demand for oil which would lead to fall in oil prices and government revenue as well as weaker exchange rate, rising inflationary pressures and depletion in external reserves.
Sanusi, said although there were satisfactory proof that the Federal Government had made laudable efforts at keeping deficits within the threshold prescribed by the Fiscal Responsibility Act, there was still need to drive down recurrent spending and increase capital expenditure in view of the infrastructure deficit which has continued to stagnate growth.