The Central Bank of Nigeria (CBN) monetary policy committee (MPC) says the recession of the Nigerian economy is “imminent”, maintaining status quo on the monetary policy rates.
Speaking on the state of the economy, Godwin Emefiele, the central bank governor, said: “The conditions that led to the contractions in the first quarter of 2016 were still largely unresolved. The recession which was signalled in July 2015, now appears imminent.”
Emefiele, who spoke on behalf of the committee, said the previous decisions of the MPC need time to crystallise, hence, there was no need for adjusting rates.
Stating the decision as the least risky option, the committee asked the CBN to work on a flexible exchange rate system, with no mention of devaluation.
The bank said the monetary policy rate (MPR) and cash reserve ratio (CRR) will remain at 12 percent and 22.5 percent respectively. Liquidity ratio was also held at 30 percent.
The MPC asked the bank to adopt a flexible exchange rate system, to allow for inflow of foreign exchange and needed investment.
“The committee noted that it was time to introduce greater flexibility in the foreign exchange market. The committee re-affirmed commitment towards maintenance of price regulation,” Emefiele said.
“The committee said in the period of stagflation, the options are very limited, the committee decided on the least risky option. The MPC voted unanimously to adopt a flexible exchange rate policy.”
Emefiele said the apex bank would unveil plans for the flexible exchange rate system in the course of time, adding that the implementation of budget 2016 will further reflate the contracting economy.
