Posted by From Mathias Okwe, Abuja on
PUBLIC sector funds totalling about N60 billion have been withdrawn from the vaults of some banks by the Central Bank (CBN).
PUBLIC sector funds totalling about N60 billion have been withdrawn from the vaults of some banks by the Central Bank (CBN).
The apex bank said yesterday that the amount was part of the N200 billion public accounts currently held by the deposit money banks.
The action , according to the CBN Governor, Prof. Charles Soludo, is to check the liquidity surge in the system and also control the rising inflation rate, which he puts at 12.2 per cent.
At a news briefing in Abuja yesterday, Soludo said that the 12-month moving inflation rate hit 12.2 per cent and the de-seasonalised point-on-point rate averaging 13 per cent, while broad money rose from 15 per cent to 17 per cent.
He blamed the situation on the sharing of the proceeds of the accumulated excess crude oil earnings from which, he said the sum of N160 billion was drawn down in the last five months, as well as capital inflows in the wake of banks' recapitalisation to N25 billion.
His words : "Evidently, there is significant inflationary pressure that is building. Broad money stock rose by 17.5 per cent, representing an annual growth rate of 42.0 per cent. This growth rate of broad money records a significant deviation from the set target of 15 per cent.
"The major source of huge liquidity injection has been the net foreign assets-ostensibly the monetisation of oil revenue receipts and excess crude earnings, and capital inflows. On the other hand, monetary policy has been under stress. The monetisation of 2004 excess crude earnings amounting to over N160 billion has contributed to the liquidity surge," he said.
Soludo admitted a persistent pressure in the Dutch Auction System (DAS) of the foreign exchange market where sales have jumped to $37 million daily, from between $25 million to $28 million daily as well as increased demand in treasury bills.
The CBN chief said only a tighter monetary policy could save the situation and sustain the macro-economic gains of last year or even surpassing them. The withdrawal of public funds in banks, he said would be a continuous exercise, which would be done in phases.
He also said that the CBN was finalising arrangements to take over the accounts of all the major Federal parastatals in fulfilment of its statutory function as a banker to the Federal Government.
Soludo however, did not mention the parastatals but it is certain that the Nigerian National Petroleum Corporation (NNPC), the Nigerian Ports Authority (NPA), the Nigerian Maritime Authority (NMA) as well as the Nigerian Customs Services (NCS) would be affected.
The CBN, Soludo said has raised the Reserve Requirement (RR) for banks by 50 basis points to 10 per cent in order to further mop up liquidity in the system, adding that henceforth debiting of banks accounts with the apex bank in this regard would be done immediately after the monthly Federation Accounts Allocations Committee (FAAC) meeting.
He explained that "this is premised on the observation by the (Monetary Policy) Committee that the pattern of liquidity overhang in the economy in recent years shows that the government's fiscal operations exert significant influence on the level of liquidity in the economy".
The CBN boss said the Minimum Rediscount Rate (MRR) remained at 13 per cent, and expressed optimism that with the effective implementation of the far-reaching measures put in place, a stable macro-economy would soon be achieved.