Apex bank to tighten monetary policy

Sanusi Lamido.
Governor, Central Bank of Nigeria

Apex bank to tighten monetary policy
Hauwa Noroh Ali Abuja

The Monetary policy Committee in Nigeria has voted in favour of further tightening of monetary policy.

The Central Bank of Nigeria (CBN)’s Governor Malam Lamido Sanusi, said this while briefing newsmen on the outcome of the 76th Monetary Policy Committee meeting, in Abuja.

According to him, the Committee maintained the symmetric corridor of plus or minus 200 basis point around the Monetary Policy Rate (MPR).

He said the committee held that it would be prudent to adopt a monetary policy stance that would be consistent to address inflationary expectations associated with excessive liquidity and pressure on foreign exchange market.

The Apex bank chief said that in the interim, monetary policy would bear the burden of adjustment through further tightening in order to rein in inflation to maintain price stability.

He said that all nine members voted in favour of tightening the monetary policy and voted for an increase in Cash Reserve Ratio (CRR) from two percent to four percent with effect from June 8 2011 to align with the next reserve averaging maintenance period.

He further stated that “six members out of the nine voted for 50 basis points increase in MPR from 7.5 per cent to 8 percent; three voted for 25 basis points increase while one voted for no change.’’

Sanusi noted that the decline in headline inflation rate was primarily due to the decline in the prices of some food items and non-alcoholic beverages, imported food items, transportation, clothing and footwear.
He said that the inflation expectations remained high owning to the subsisting high fiscal spending.

Cash limit policy test

Malam Sanusi said that the apex bank would in the next six months use Lagos State, the Commercial nerve of Nigeria, as a modern to test-run the cash limit policy.

He said: “this is what we are going to do for the next six months. We have what we call a project `Cashless Lagos’, we will bring Lagos as a model, you see ATM density, we are going to work with telecom companies and you find that you go to Lagos and do your business with cards.”

Sanusi stressed that, to transform the economy, there must be measures to fight money laundry and corruption. “The Central Bank would continue to talk to people and would remain to be flexible about the limit.

Withdrawal benchmark

“It can be 150 000 Naira, 300 000 Naira, we can talk about the charges, these are not things that are cast in stone but the important thing is the principle. There will be cash limits and we are going to move transaction away from cash to electronic banking.’’ he said.

He assured Nigerians that there were on-going public discussion and that appropriate measure would be taken before the time comes.

The CBN governor noted that less than eight percent of cash transactions in Nigeria were less than 150, 000, stressing that reduction in cash transaction would help to move the economy.

Sanusi said that the policy was one aspect of the programme of reforming the financial system. “The policy will take effect from June next year. We did not say there is a limit to N150 000, we simply said that if you want to cash more than that, it is just more expensive” Sanusi said.

The governor said that it cost the bank about 200 billion Naira to print money, secure, transport, destroy and process it.

He noted that the top seven banks in Nigeria spend about 100 billion Naira on Cash management which is a major drain to the economy.

The Central Bank of Nigeria has pegged June 2012 for the implementation of the cash limit policy

Williams