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CBN gives reasons for hike in MPR to 15.5%

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.Invests N9.3trn in various development finance interventions





The Central Bank of Nigeria (CBN) Wednesday explained the reason for its Monetary Policy Committee (MPC) decision to increase Monetary Policy Rate (MPR) to 15.5 per cent, saying it got to a point where stringent measures have to be taken to control inflation.


CBN Director, Monetary Policy Department, Hassan Mahmud, who gave the explanation Wednesday at a virtual post-MPC briefing tagged: “Unveiling Facts behind the Figures’’, said the committee considered the global as well as local economic issues in arriving at its policy decisions.


He said the amount of money in the system was too much for the economy to absorb, “We raised the MPR because it is necessary to do so.


According to him, the monetary policy tools were meant to deal with short-term risks.


He said that the idea was to make the cost of funds expensive to drive down inflation.


Speaking further, Mahmud blamed the Russian-Ukraine war, as well as the resurgence of the COVID-19 pandemic in China as responsible for the rising global inflationary trends.


“That region accounts for more than 50 per cent of global commodity supply and 38 per cent of global oil and gas supply. The war resulted to some shortages which made prices go up.


“Then the COVID-19 lockdown in China. The country is the largest importer of commodities across the globe,’’ he said.


Director, Development Finance Department, Dr. Yusuf Yila, who spoke on the various intervention initiatives by the CBN said that about N9 trillion had been invested in the various development finance interventions, stressing that all the monies would be recovered.


According to Yila, N9.3 trillion has been invested in various development finance interventions, out of which N3.7 trillion has been repaid.


“Most of the loans are still under moratorium, especially those in manufacturing. Manufacturing forms the largest part of our portfolio, about 31 per cent,’’ he said.


He, however, said that one of the best-performing interventions was the Commercial Agriculture Credit Scheme (CACS), where out of the N800 billion that was lent out, about N700 billion had been repaid.


Yila said that N1 trillion had been lent out to smallholder farmers, through the Anchor Borrowers Programme (ABP) while about N400 billion has so far been recovered.


“We are slowing down on intervention; it is not as if we are not going to do it. The manufacturing loans are long term between five and 10 years, N5 trillion of it is not due, as it is due they will come back,” he said.


According to him, the department will restrict intervention to critical sectors like the Small and Medium scale Enterprises (SMEs) and the electricity sector for now.


Director, Trade and Exchange Department, Mrs. Ozoemena Nnaji, said the apex bank was taking steps to firm up the currency, saying the demand for foreign exchange outstripped supply currency, adding that the CBN was doing a lot to mop up supply.


She said, “One of the steps is the Naira for dollar remittance drive, which has resulted in a huge increase in diaspora remittance


“There is also the RT200 bringing in forex. Repatriation has gone up from $20 million in the first quarter to about $600 million in the second quarter. In this third quarter we are looking at more than one billion dollars of repatriated inflows,’’ she said.


The MPC rose from its 287th meeting on Tuesday and increased the MPR by 150 basis points, from 14 per cent to 15.5 per cent.


The CBN Governor, Mr. Godwin Emefiele said the decision was informed by a persistent rise in the inflation rate and fragile economic growth.


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