CBN says raising interest rate will be counterproductive
Nigeria’s central bank on Monday retained the benchmark interest rate at 12.5 per cent.
Analysts had predicted that the apex might leave rates unchanged due to prevailing economic indications which neither support rate hike or a cut.
Central Bank of Nigeria, CBN Governor Godwin Emefiele said eight of the 10 monetary policy committee members voted to retain the rate and two voted for a rate cut.
Recall that the MPC unexpectedly cut the rate by 100 basis points, to 12.5 per cent from 13.5 per cent, in May. It was the largest rate cut since 2015.
The Bank also retained the asymmetric corridor of +200/-500 basis points around the MPR as well as the Cash Reserve Ration, CRR at 27.5 per cent.
Liquidity Ratio remained at 30 per cent.
In a communique issued at the end of the meeting, the apex bank said: “The Committee noted that the earlier downward adjustment of the MPR by 100 basis points to 12.5 per cent to signal the loosening monetary policy stance is yielding positive impact as credit growth increased significantly in the economy.”
The MPC also noted the positive impact of the various fiscal and monetary interventions on households, SMEs and manufacturing, said the communique.
The Committee also noted that increasing MPR at this stage will thus be counter-intuitive and will result in upward pressure on market rates and the cost of production, the communique added.