Overview

The document is a press briefing by the Governor of the Central Bank of Nigeria, Professor Charles Soludo, on the outcome of the Monetary Policy Committee (MPC) meeting held on June 15, 2005. The MPC reviewed macroeconomic developments in Nigeria during the first half of 2005, noting concerns about rising inflation, excessive liquidity, and pressures on the foreign exchange market. Key economic indicators included inflation at 12.2% on a 12-month moving average basis and 13% point-on-point de-seasonalized, broad money supply (M2) growth of 17.5% (annualized 42%) against a target of 15%, and external reserves at $23 billion against a target of $20.75 billion. The MPC attributed liquidity injection primarily to government releases from the Federation Accounts Allocation Committee (FAAC) and sales of foreign exchange via the Dutch Auction System (DAS), which averaged $37 million per day. The committee also noted fiscal policy stress due to monetization of excess crude, decline in non-oil revenue, and fall in OPEC quota, with the limit on Ways and Means reached by June 14. To address these issues, the MPC adopted tighter monetary policy measures: withdrawal of N60 billion of public sector deposits from the banking system within two months; maintaining the Minimum Rediscount Rate (MRR) at 13% to support the real sector; and increasing the Reserve Requirement (RR) from 9.5% to 10%, with immediate debiting of banks' accounts after FAAC meetings. The briefing emphasizes the MPC's commitment to sustaining economic achievements from 2004.

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