The Central Bank of Nigeria (CBN) has vowed to sanction banks indicted in the pension probe scam.
This is even as the Monetary Policy Committee of the CBN leaves monetary policy rate (MPR), which is the benchmark interest rate, unchanged at 12 per cent as anticipated. Also, the interest rate corridor of +/- 200 basis points was retained.
Accordingly, the standing lending facility interest rate is 14 per cent while the standing deposit facility remains 10 per cent.
Cash reserve ratio (CRR) and minimum liquidity ratio were also maintained at 8.0 and 30 per cent respectively.
CBN governor Sanusi Lamido Sanusi said the apex bank was still awaiting the report of the pension fund probe and that any bank found to have breached the regulation on account opening, as alleged by the probe panel, would not be spared.
“We are waiting for the report. We are currently in discussion with the minister of finance, and once the report is ready, it would be forwarded to us and we will look into it. Any bank that was involved in it (pension fund) will be dealt with,” Sanusi stated.
This is the third time in a row that the MPC left MPR unchanged. The last time the MPR and CRR were changed was in October 2011, when they were moved from 9.25 per cent to 12 per cent and 4.0 per cent to 8.0 per cent respectively.
In arriving at its decision, Sanusi said, the MPC was faced with a choice between two options. One option was to consider, in view of the improving global economic environment, a moderation in headline inflation, slowdown in monetary aggregates and fiscal spending and the crowding out effects of high interest rates, a reduction in the policy rate.
The apex bank boss said the argument was considered but rejected on the basis of a number of factors which included persistent underlying core inflationary pressures, the need to continue supporting the naira and build up external reserves, the necessity for attracting and retaining foreign investment and the need for consistency and stability in the macroeconomic environment.
He noted that the apex bank needs to maintain its clear focus on price stability and it was not evident that a moderation in inflation rate in February was sufficient to establish a trend, and warrant a reversal of monetary tightening.
The committee also resolved to watch closely developments with respect to the fiscal stance and to respond appropriately if, and when, the need arises.
The committee noted with satisfaction the introduction of some fiscal and structural measures that could improve the revenue base of the government as well as enhance the capacity of the domestic economy to improve the value chain in the production process.
Some of these measures include introduction of cost-reflective electricity tariffs and progress in agricultural transformation initiatives.
Sanusi noted that although these measures would have a salutary effect on the fiscal position, they may, in the short run, put pressure on domestic prices.
He therefore called on both monetary and fiscal authorities to put in place coordinated measures that would moderate the increase in the general level of domestic prices in the short to medium term.
The committee was also concerned about the rising level of domestic debt and its sustainability, as shown by the average debt service to revenue ratio of 17.6 per cent in the last three years. This would likely have a negative impact on domestic interest rates and the flow of credit to the core private sector, among others.
Although debt to GDP ratio in 2011 stood 17.8 per cent, the committee noted that the percentage of debt service to government revenue was high at 19.1 per cent in the same year.
In view of the high interest rate environment occasioned by tight monetary policy stance, he called for moderation in government borrowing, which would be positive not just for the fiscal position but for access to finance by the private sector.