By Austin Edoho
The Managing Director/CEO of First Bank Nigeria Plc, Dr. Adesola Adeduntan yesterday, via an e-statement, reacted to the release by the Nigerian Bureau of Statistics of Q1 2017 output numbers which was the main new ingredient in the decision variables which the central bank’s monetary policy committee had to consider at its just-concluded meeting. He stated that, “In the end, despite the new output numbers, by voting to keep its main policy levers on hold, the committee did not disappoint pre-meet expectations”.
According to him, “The fact that the economy shrank by 0.52% in the January-March period was a key consideration in the committee’s deliberations, as were what it described as more focused macroeconomic policies and improvement in global oil prices. Additional positives identified by the committee include the effects of improved foreign exchange management, on inflation and new investments, and growth in net domestic credit”.
To him, however, “these positives contain within them their own contradictions. For instance, although, domestic credit grew in April, not just was this growth below the programme target, much of it was to government, at the expense of the private sector. While this is one consequence of the current wide gap between nominal and real interest rates, it did not suffice as an argument for raising rates. Instead, the committee noted how in restraint of the growth needs of the economy the current high cost of capital is”.
He also pointed out that, “While noting that domestic prices are rising at a much slower rate, the committee worried that the inflation outlook does not appear benign as the limits of the base effect underlying recent moderation may have been reached. In other words, a loosening of monetary policy now may be premature”.
He believes that, “The vote to keep the main policy levers on hold, therefore, was taken, as the central bank’s governor put it, to allow existing policies, including (sustaining and deepening the bank’s foreign exchange management policies) to achieve their intended goals and objectives”.