Posted by Ben-Bright Mkpuma on
The federal government has painted a gloomy picture about the possibility of the government achieving a 10 per cent economic growth.....
The federal government has painted a gloomy picture about the possibility of the government achieving a 10 per cent economic growth, which it set as the target growth rate for this year.
This is attributed to the prevailing trend in the oil sector where Nigeria is finding it difficult to produce up to its quota as allocated by the Organisation of Petroleum Exporting Countries (Opec).
Professor Charles Soludo, governor, Central Bank of Nigeria (CBN), who expressed this doubt in Abuja yesterday while reviewing the efforts of the CBN to implement the government’s monetary policy, said the country would probably perform better in the non-oil sector. “We are not likely to make 10 per cent because we have lost a significantly chunk of (oil) production output.”
The CBN governor put the inflation rate at 13.6 per cent, as at end of March this year, noting that this was unacceptable. He observed that the overall downward trend in inflationary pressure reflected the effects of monetary policy tightening designed to address the excess liquidity in the financial system in the second quarter as well as the appreciation of the naira exchange rate.
He said the early harvest of some agricultural food products, sustained stable prices of petroleum products in the domestic market and narrowing of the gap between the bureau de change exchange rate and that of the parallel market, assisted to dampen inflationary pressure in the review period.
According to Soludo, the monetary policy management is being threatened by the planned supplementary budgetary expenditure of the government and rising private sector inflows, both of which are likely to shore up liquidity in the system.
The apex bank, he said, is currently faced with the challenges of how to control money supply in the economy, check prices of goods and services, and maintain a stable exchange rate regime.
While the monetary policy committee said it would for now allow the minimum rediscount rate to remain at 14 per cent, it noted that it may be reviewed from time to time. The central bank added that it would cost about N150 billion to keep monetary operations in check, between now and end of 2006.
On current challenges and risks, the CBN governor said “some risks to low inflation and monetary management still exist”.
These he noted, include increasing cost liquidity management; rapid growth in money supply, planned extra-budgetary spending by the government; increasing autonomous inflows.” The committee, according to him, also resolved that the exchange rate will not be pegged, which means market forces will determine the rate.
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