The Central Bank of Nigeria (CBN), Monetary Policy Committee (MPC), has again retained interest rate at 14 per cent, as well as other policy parameters.
This is the 12th time the apex Bank is holding rates, after the interest rates were first raised in July 2016 to combat rising inflation.
In a statement issued by the CBN, the decision to hold interest rate at 14% is wirh some expectation to sustain gradual improvements in output growth and maintain the current monetary policy stance.
The CBN Governor, Godwin Emefiel after the Monetray Policy Committee meeting in Abuja on Tuesday, also said that the decision to retain the Monetary Policy Rate (MPR) at 14 per cent, is to enable a clearer understanding of the quantum and timing of liquidity injections into the economy before deciding on possible adjustments.
He noted however, that the hold was decided by a vote of seven (7) members, stating that three (3) of the seven (7) members voted to raise the Cash Reserve Requirement (CRR) by 150 basis points, an indication that left to them, the monetary policy stance should have tightened.
Mr Emufele stated that the MPC voted to retain the MPR at 14 per cent; retain asymmetric corridor of +200/-500 basis points around the MPR; retain the CRR at 22.5 per cent; and retain the Liquidity Ratio at 30 per cent.
Speaking on the option of raising rates, Emefiele said that it would further weaken growth as credit would become more expensive and Non Performing Loans(NPLs) would increase further, leading to a deceleration in output.
According to him “In the Committee’s opinion, the upward adjustment would not only signal the Bank’s commitment to price stability but also its desire to maintain positive real interest rates”
The CBN Governor also noted that the Committee identified rising inflation and pressure on external reserves created by capital flow reversal as the current challenges to growth, adding also, that inflationary pressures have started rebuilding and capital flow reversals have intensified.
The Committee while reiterated the need for synergy between monetary and fiscal policies as a viable option for macroeconomic stability and called on the government to fast track the implementation of the 2018 budget to help facilitate the process of sustainable economic recovery, and to fast track the passage of the Petroleum Industry Bill.