By Ifeanyi Onuba

Wednesday, 24 Nov 2010

The Central Bank of Nigeria, on Tuesday, said that it would not approve any bail-out package for oil marketers operating in the downstream sector of the petroleum industry.

The CBN Governor, Mr. Lamido Sanusi, disclosed this to journalists in Abuja, shortly after the Monetary Policy Committee meeting.

Oil marketers had, in the past, urged the apex bank to come to their rescue over their inability to pay off the huge debts they owed Deposit Money Banks.

The situation had made some of them to suspend the importation of petroleum products, thereby resulting in the scarcity of petroleum products in some parts of the country.

But Sanusi, while rejecting their plea, said that it would not be in the interest of the country for the CBN to inject public funds into non-productive areas of the economy.

He said, ”There will be no bail-out for oil marketers; these are traders who sold their commodities and stocks and got subsidies from the Federal Government.

”If they sold the commodities and diverted the money to other lines of business; then, they should be able to pay their debt and I can assure anybody who owes the banks that if the Asset Management Corporation of Nigeria takes over, it will be a very serious debt recovery agent.

”We are not here to throw away government money and if they know they can pay, then they should pay.”

Sanusi also said that the MPC decided to leave the Monetary Policy Rate unchanged at 6.25 per cent because the impact of the last meeting, where the MPR was raised to the current rate, was just being felt.

He said that, in reaching its decisions, the committee noted the level of elevated inflation in the country; rising government expenditure and borrowings with the possible crowding out effects on the private sector. He said the demand pressure in the foreign exchange market, which had led to reduction in external reserves was also considered.

The governor pointed out that after due considerations, all members of the committee agreed that there was a need for belt-tightening.

However, he noted that the discussions centred on the form and the timing of the tightening.

Consequently, he said that, after due consideration by the 10 members of the committee, who attended the meeting, six voted in favour of the retention of the MPR at 6.25 per cent, while four other members voted against it.

He said, ”The committee agreed on a majority decision of six to four members to retain the current policy rate, given the need to retain flexibility and allow the effect of the previous rate increase to work through the system, against the argument for immediate increase in view of the elevated inflation risk.

”Also, the committee agreed by a majority of nine to one members to narrow the corridor around the MPR by reintroducing the symmetry of +/- 200 basis points.”

Other decisions taken at the meeting included the maintenance of the policy stance of a stable exchange rate, as well as the need to continue to monitor inflationary trends with a view to taking appropriate steps as and when necessary.

On the stance of monetary policy in the year ahead, the committee reaffirmed that the monetary policy would seek to exert pressure on aggregate demand, thereby helping to lower inflation expectations.

In addition, Sanusi said that monetary policy would provide adequate and timely liquidity to support credit dynamics that would sustain fiscal mechanisms to bolster growth.

 

Source: Punch