PRESS RELEASE

CENTRAL BANK OF NIGERIA, COMMUNIQUE NO. 37 OF THE MONETARY POLICY
COMMITTEE
IN JULY, 2004


The Monetary Policy Committee (MPC) at the end of its 184th meeting in July 2004,
decided to keep unchanged the recent recall of public sector funds lodged with the deposit
money banks. It would be recalled that at the end of its previous meeting, the MPC
approved the withdrawal of public sector deposits amounting to N74.5 billion from the
banks to the CBN. This represents 75.6 per cent of total public sector deposits and from
only four parastatals. It would also be recalled that the temporary withdrawal of public
sector deposits is part of the liquidity management instruments of the CBN, stated in its
Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for fiscal 2004/2005.

2.
This would help to sustain the tightening of monetary policy stance agreed to in the
previous meeting, in order to stem the rising inflationary pressure and the high demand for
foreign exchange.

3.
Available information since the last meeting indicated that the pressure on prices has
continued. The daily average demand for foreign exchange dropped, but remained
unsustainably high. The gross official external reserve increased and the naira exchange
rate appreciated in the Dutch Auction System (DAS) segment of the market, owing to the
increased supply of foreign exchange by the CBN. The exchange rate depreciated in the
Bureaux de Change (BDC) market, thereby widening the spread between the DAS and
the BDC exchange rates.

4.
The Committee also observed that the growth in monetary aggregates remained within the
programme targets, as bank credit to the Federal Government continued to fall.
Nevertheless, it recognized the threat to monetary stability posed by the anticipated
bunched government spending on capital projects in the rest of the year. It also noted the
risk of further pressure on prices if the monetary policy stance should be relaxed so soon.
In this regard, the Committee agreed to sustain the phased recall of public sector funds
with the deposit money banks until further notice.


James K. A. Olekah,
Secretary,
Monetary Policy Committee,
Central Bank of Nigeria,
Abuja.

29th July, 2004