The Central Bank of Nigeria (CBN) has called for the downward review of the $57 oil benchmark adopted by the Federal Government in the 2020 budget, saying it is unrealistic.
The CBN Governor Godwin Emefiele lamented that the Monetary Policy Committee (MPC) has “noted the lull in the futures market, suggesting that prices would remain relatively weak into the foreseeable future.”
He spoke with reporters at the end of the MPC meeting in Abuja yesterday.
The Committee, Emefiele said, “therefore, urged the Federal Government to reconsider its 2020 budget oil benchmark of $57 per barrel, to build fiscal buffers.”
As at the close of business last night, the crude price stood at $64.27/barrel.
Also, the current policy of the Central Bank of Nigeria (CBN) on loan-to-deposit ratio has resulted in loans and advances by banks to businesses rising by over N1.1 trillion between June and October.
According to the CBN boss, “these actions have assisted in boosting credit to the agricultural and manufacturing sectors, hence, the positive outcome on the GDP.
“The MPC is hopeful that the LDR initiative must be sustained as interest rates being paid by borrowers have so far dropped by up to 400 basis points between June and October 2019.”
These, he said, have happened with a corresponding decline in Non-Performing Loans (NPLs) to 6.5 per cent at the end of last month.
“The MPC”, Emefiele noted, “is of the view that the improvements in the macroeconomic indicators such as the GDP, NPLs, Capital Adequacy Ratio (CAR) and the LDR, suggest that current monetary policy stance is yielding results.
“As a result, the MPC resolved by a unanimous vote to retain the Monetary Policy Rate (MPR) at 13.5 per cent and to hold all other policy parameters constant by retaining the asymmetric corridor at +200/-500 basis points around the MPR; retain the Cash Reserve Ratio (CRR) at 22.5 per cent; and retain the Liquidity Ratio at 30 per cent.”
Speaking on the withdrawal of foreign investors from the country, Emefiele called on the Federal Government to make life easy for investors to do business, arguing that investment-friendly policies would make Nigeria a destination of the first choice for investors.
Reacting to questions that foreign investors were leaving Nigeria with their investments, the CBN governor said: “Issues bothering on the ease of doing business making life easy for people who choose to come to Nigeria to invest their funds whether portfolio or direct investors we should make life easy for them so that they will find Nigeria as an investment destination.”
The MPC stressed the need for diversification to strengthen the productive base of the economy and reduce dependence on oil.
He said: “Diversification has become necessary now that Nigeria has signed the African Continental Free Trade Agreement (AfCTA).
“To achieve this, the Committee urged the Federal Government to continue to improve the investment climate and ease of doing business to attract Foreign Direct Investment.
“Particularly, the government should, as a priority, improve conditions for global auto manufacturers, including for aviation and rail industries to invest in the country.”
The Committee has called on the government to “urge the National Pensions Commission (PenCom) to improve the prudential requirements for pension funds to refocus their investment portfolio away from their traditional choice of government securities in favour of other viable long-term investments in real estate, manufacturing and agriculture; and indeed infrastructure.”
With regards to the ongoing border closure, Emefiele said the CBN “will continue to advise the government to sustain the border closure or whatever is being done to make it easy to ensure that we use this opportunity to boost employment and also grow output, as well as keep our industries alive.”
On the impact of the recent closure of Nigerian land borders on domestic food prices, the Committee noted that any upward price movement arising from the closure was reactionary and therefore temporary.
Emefiele argued that significant investment has been made over the last three years to sustainably increase domestic food supply.
“Some of the key initiatives in this direction to include: the Commodity Development Initiatives, designed to finance the agricultural value chain of 10 commodities namely; cassava, cocoa, cotton, rice, tomato, poultry, livestock and dairy, fish, oil palm and maize, which has received N171.66 billion in funding.
Four of these crops received over N140.12 billion or 81.6 per cent of total disbursements (cassava, 11.44 billion naira; cotton, 40.47 billion naira; rice, 53.40 billion naira; oil palm, 34.81 billion naira).
“It is, therefore, expected that the outcome of these interventions will close the supply gaps already envisaged in the medium to long term, including dampening domestic prices. It thus, expressed support for the temporal closure of Nigeria’s land borders, noting that securing the country’s land borders should be further
enhanced.”