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Monetary Policy

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Monetary Policy Decisions

MPC Meeting of November 1, 2005

1. The MPC mandated the review of the rules and procedures guiding the forex market with a view to simplifying and improving upon them;
2. Observed that the fiscal authorities must make adequate provisions in the 2006 budget for Treasury Instruments for appropriate liquidity management in 2006;
3. Reiterated the commitment of the CBN to meet its target growth of money supply for 2005 (that is, 15 per cent). Consequently, the MPC resolved to take the following additional measures to bring money supply in line with the target:

• Complete the sale of N60 billion of CBN instrument, and sell more if need be;
• Sale of Treasury Bills which will be sterilized for liquidity management;
• Sale of additional foreign exchange to mop up liquidity;
• Move all NNPC deposits with commercial banks to the CBN and sterilize much of it with effect from October 31, 2005. All banks that collect revenues on behalf of the NNPC are expected to remit all such funds to the CBN within 48 hours of the collection. Failure to remit such funds will attract a penal interest charge of MRR plus 5. Any MD of a bank who misreports NNPC deposits with it or falsifies any returns to the CBN will be suspended for three months in the first instance;
• To ensure effective monitoring and implementation of liquidity management programme, the MPC set up a Monetary Policy Implementation Committee which shall meet every two days to review developments and take necessary actions.

MPC Meeting of June 15, 2005

1. The withdrawal of N60 billion public sector deposit from the banks to the CBN, which should be concluded within a period of 2 months;
2. The maintenance of the prevailing minimum rediscount rate (MRR) of 13 per cent. This action would help sustain the prevailing policy measure in encouraging credit to the growth sectors of the economy;
3. The upward revision of the cash reserve requirement (CRR) by 50 basis points from 9.5 to 10 per cent in order to further mop up excess liquidity in the system. The Committee further agreed that, henceforth, the debiting of banks accounts with CBN to meet the stipulated CRR should be effected immediately after the monthly FAAC meetings. This is based on the observation by the Committee that the FAAC related liquidity, is the major source of excess liquidity in the economy.
4. The revision of the definition of Liquid Assets to include 3-year bonds;
5. That, until the Pension Funds Administrators are appointed, funds realised from the Pension Fund should not be invested in the Nigerian Treasury Bills instead they should be invested in long-term securities or sterilized;
6. The sustenance of the exchange rate band of ± 3 per cent.

MPC Meeting of January 24 & 25th, 2005

1. Reduction of the MRR by 200 basis points, in order to reduce the cost of private sector borrowing for productive investment;
2. Adoption of two weeks maintenance period for the CRR; and
3. Adoption of an exchange rate band of plus/minus 3.0 per cent, to sustain exchange rate stability, anchor expectations and minimize transaction costs.