Reasons for maintaining interest rate
The Monetary Policy Committee of the Central Bank of Nigeria (CBN) on Tuesday voted to hold all policy parameters constant.
They voted unanimously to retain the Monetary Policy Rate (MPR) at 11.5 percent, the asymmetric corridor of +100/-700 basis points around the MPR, the CRR at 27.5 percent, and the Liquidity Ratio at 30 per cent.
According to the CBN governor, Godwin Emefiele the committee’s decision to hold rates was based on the following consideration:
- The committee noted that although the economy had successfully exited the recession, the recovery was very fragile given that the GDP of 0.51 per cent was still far below population growth rate.
- The recent developments in the domestic economy presented two broad options to the MPC, which were to either aggressively address the high inflationary pressure or continue to pursue measures aimed at supporting the recovery.
- Emefiele said the Committee remained overwhelmingly committed to supporting the efforts of the Federal Government in ensuring full restoration of the productive capacity of the economy, members remained much more focused on achieving price stability in the short to medium term.
- The MPC noted that economic growth could be hampered in an environment of unstable prices.
- To this end, the choice, therefore, was between loosening the stance of policy to ease credit further or tighten to moderate price development or maintain a hold stance in order to allow previous policy measures to continue to permeate the economy while observing global and domestic developments.