Posted by By ISAAC ANUMIHE, Abuja on
Central Bank of Nigeria CBN on Wednesday said it would increase the issuance of primary market instruments to mop up about N100 billion from the system to ensure the stability of the exchange rate and to check the risk of over-appreciation of the naira/dollar exchange rate.
Central Bank of Nigeria CBN on Wednesday said it would increase the issuance of primary market instruments to mop up about N100 billion from the system to ensure the stability of the exchange rate and to check the risk of over-appreciation of the naira/dollar exchange rate.
Speaking after the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Professor Chukwuma Soludo, also noted that the MPC, which concluded its meeting on Tuesday decided to reduce the Monetary Policy Rate by 200 basis points and equally reduce the width of interest rate corridor from 300 to 250 basis points.
According to him, the deposit facility now stands at 5.5 per cent, while the lending facility would be 10.5 per cent. This means that both lending facility and deposit facility have come down to seven and 13 per cent respectively, saying that both facilities are expected to be used as a last resort.
He warned that frequent usage of these facilities would attract penalty. He, however, did not disclose the details of the penalty, saying that they would be communicated to the banks.
Soludo observed that the inflation rate stayed within single digit in the first four months of 2007 while the year-on-year (headline) inflation dropped steadily from 8.5 per cent at the end of December 2006 to 4.5 per cent in April 2007.
On the exchange rate, Soludo submitted that the naira exchange rate in the Wholesale Dutch Auction (WDAS) has moved between N126,60/US$1 and N12,29/US$1 in January through May, 2007.
"In addition, the premium between the WDAS and BDC rates narrowed from 1.39 per cent in January to 1.2 per cent in May 2007," he said.
External reserves, he said, rose from $41.96 billion as at December 2006 and gross official reserves rose to $43.48 billion as at May 28, 2007. For him, this level of reserve could finance 25 months of imports. As he noted, the risk growth of reserve arising from the decline in the volume of crude oil production due to disturbances in the Niger Delta, he, however, welcomed the initiatives of the government to resolve the crisis.
The governor stated that growth in aggregate domestic credit declined by about 63.7 per cent at end March and 38.7 per cent in April 2007 relative to its level at end December 2006.
"However, reserve money rose to N896.0 billion, while the forecast to end-June 2007 is about N926.50 billion, which is higher than the PSI target by N66.5 billion," he said.