PRESS RELEASE

CENTRAL BANK OF NIGERIA COMMUNIQUE NO. 52 OF THE MONETARY
POLICY COMMITTEE, OCTOBER 3, 2007

The Monetary Policy Committee of the CBN met on 3rd October 2007 and
decided to raise the MPR to 9.0 per cent

1) The Monetary Policy Committee (MPC) met on 3rd October, 2007. The
Committee reviewed the major macroeconomic developments and the
implementation of fiscal, monetary and exchange rate policies in the third
quarter of 2007, as well as the challenges for the rest of the year. The
meeting, the fourth in 2007, lasted about 6 hours. The MPC noted both the
global and domestic economic and financial developments. It also noted that
the macroeconomic environment in the third quarter of the year has helped to
sustain single-digit inflation, relatively stable naira/dollar exchange rate, and
the inter-bank interest rate which remained within the corridor defined by the
Bank’s Monetary Policy Rate (MPR).
2) It however, noted the prospects for further increase in liquidity and the
potential of further appreciation of the naira exchange rate, and of inflation in
view of the possible substantial fiscal injections in the fourth quarter of the
year arising from the supplementary budget at the federal and state levels.
The Committee, thus, restated its commitment to ensuring continued price

and exchange rate stability through appropriate monetary policy stance in the
rest of the year.
Key Macroeconomic Developments
3) Inflation: Inflation stayed within single-digit in the third quarter of 2007. The
Committee noted with satisfaction the decline in year-on-year (headline)
inflation from 6.4 per cent in June 2007 to 4.8 per cent in July, 2007 and
further down to 4.2 per cent in August, 2007.
4) Exchange Rate: The MPC noted the slight appreciation in the naira
exchange rate at the wDAS in July through September, 2007. The naira
exchange rate at the wDAS appreciated from N126.05/US$1 in June to
N124.75/US$1 in September 2007, representing an appreciation of about
1.03 per cent. The Committee noted the effect of rising private foreign
exchange inflows on the naira exchange rate.
5) External Reserves: The Committee noted with satisfaction the increase in
gross official reserves which stood at about US$47 billion in September,
2007. This represented an increase of 28.4 per cent when compared with the
level of US$36.63 billion in the corresponding period of 2006. The level of
reserves, the Committee noted, could support approximately 20 months of
current foreign exchange disbursements.
6) Growth in Monetary Aggregates: At the end of July, 2007, broad money
grew by 13.3 per cent and further to 15.7 per cent in August. Staff projections

suggest that M2 grew by 16.1 per cent in September and would grow at about
17.6 per cent in October, 2007. When annualized these translate to 23.5 per
cent in August; 21.5 per cent in September; and 21.1 per cent in October,
2007, respectively.
7) Reserve Money: In June, 2007 reserve money stood at N858.4 billion which
was lower than the target under the Policy Support Instrument (PSI)
programme target of N860.00 billion. However, as at end-September 2007
reserve money was N928.6 billion compared with the target of N880.0 for the
third quarter of 2007.
8) Credit: Growth in aggregate domestic credit (net) declined by 36.6 per cent in
August compared to 56.11 per cent decline at the end of the second quarter
of 2007, driven mainly by sustained decline in credit (net) to government.
Meanwhile, credit to the private sector maintained an upward trend, rising by
about 48.79 per cent by July 2007, compared to the target growth of 30 per
cent for the year.
9) Interest Rates Developments: The MPC noted that volatility in the interbank rates continued to ameliorate as rates fluctuated around the MPR. The
average inter-bank call rate moved between 6.0 per cent and 8.57 per cent
since end-August, 2007. Other market rates remained relatively stable and
were generally within the corridor.

OUTLOOK FOR REST OF 2007 AND MPC DECISIONS
The MPC noted that year-on-year headline inflation would continue to remain
single-digit in the rest of 2007, but at the upper region of the single digit
range. Overall, a combination of stable food prices and a restrictive monetary
policy stance is expected to help sustain the headline inflation within singledigit. The Committee also noted the challenges arising from rising
autonomous private inflows and the attendant risk of further appreciation of
the naira/dollar exchange rate. In addition, the Committee also noted the high
possibility of substantial fiscal injections in the fourth quarter, arising from the
supplementary budget at the federal and state levels.
The Committee, thus, decided that the CBN:
a) will continue to deploy increased forex sales for purposes of liquidity
management
b) embark upon active open market operations
c) move the MPR to 9.0 per cent; which would be the repo rate and the rate at
which CBN lends to the banks.
d) The deposit money banks’ deposits with the CBN will no longer earn interest.
These measures are intended, amongst others, to deepen inter-bank trading and
encourage banks to free-up resources to enlarge the credit market.
Thank you for your kind attention.
Prof Chukwuma C. Soludo; CFR
Governor,
Central Bank of Nigeria,
Abuja.

October 3, 2007