The Monetary Policy Committee has retained the Monetary
Policy (lending) Rate at 12 per cent reports said.

Malam Sanusi Lamido Sanusi, Central Bank Governor, made this
known while briefing newsmen on the outcome of committee’s meeting last week in
Abuja.

“The committee in an unanimous vote, decided to retain the
monetary policy rate at 12 per cent, plus or minus two per cent.

“It also retained the cash reserve requirement at 12 per
cent and the net open position at one per cent,’’ he said.

Reports said that this was the seventh time the committee
had retained the lending rate at 12 per cent.

Sanusi said the committee had identified three major
monetary policy challenges, which include protecting the domestic economy and
building the external reserve buffer, potential large inflow of hot money and
persisting high core inflation rates.

He said the committee was concerned that the lending rate
remained high and enjoined banks to sustain efforts on the interest rate
spread.

On inflation modulation, the CBN Governor said the
year-on-year headline inflation declined to 11.7 per cent in August from 12.8
per cent in July while core inflation decelerated to 14.7 from 15.0 per cent
during the same period.

He added that food inflation declined sharply to 9.9 per
cent in August from 12.1 per cent in July.

“The significant decline in year-on-year food inflation was
attributed to the decrease in prices of both processed foods (from 4.2 to 3.6
per cent) and farm produce (from 7.9 to 6.4 per cent).

“The committee observed that the inflationary pressures from
the partial removal of petroleum subsidy in January appear to have waned in
third quarter of 2012.

“Given the relatively stable exchange rate regime, the
pass-through to domestic prices was low during the period,’’ Sanusi said.

On the domestic economic and financial developments output, he
said that recent macroeconomic data indicated that the economy was performing
better than it was forecast.

He added that this was in spite of the fact that growth in
the first two quarters of 2012 remained consistently below the corresponding
growth rates in 2011.

According to him, the provisional real GDP growth rate from
the National Bureau of Statistics stood at 6.28 per cent in second quarter of
2012, up from 6.17 per cent in the first quarter of 2012 but lower than the
7.61 per cent recorded in the corresponding period of 2011.

He noted that the non-oil sector remained the major driver
of growth recording a 7.50 per cent increase in contrast to the oil sector,
which contracted by 0.73 per cent during the period.

“ Overall GDP growth for fiscal 2012 has been revised
upwards to 6.77 per cent from the earlier projection of 6.50 per cent.

“ The committee welcomed the promising growth performance
although it expressed concern that the overall output growth projection for
2012 is still lower than the 7.45 per cent recorded in 2011,’’ Sanusi said.

He said the growth drivers within the non-oil sector
remained agriculture; wholesale and retail trade and services, which
contributed 1.94 per cent, 1.69 per cent, and 3.16 per cent, respectively.

On the external reserve, he said the committee expressed
satisfaction with the significant accretion in external reserves during the
period.

“Gross external reserves as at Sept, 5, stood at 41.81
billion dollars, representing an increase of 6.40 billion dollars or 18.07 per
cent above the level of 35.41 billion dollars at end-June 2012.

“External reserves increased by 8.88 billion dollars or 27.0
per cent on a year-on-year basis compared with 32.93 billion dollars at end-
August 2011.

“The increase in the reserve level was driven mainly by
proceeds from crude oil and gas sales and crude oil related taxes.

“ The foreign reserves level could finance over seven months
of imports’’, the Governor said.