After a long delay due to the National Assembly refusing to screen nominees, the Central Bank of Nigeria (CBN)’s Monetary Policy Committee  (MPC) met on Tuesday and Wednesday this week.

The committee opted to leave the Monetary Policy Rate (MPR) at 14% and all other variables unchanged. Cash Reserve Ratio (CRR) was left at 22.5%, Liquidity Ratio at 30.0% and Liquidity Ratio at 30%. The Asymmetric corridor was left at +200 and -500 basis points around the MPR. Plainly put the corridor means rates can go up at 2% maximum and lowered by at most 5%.

What is the MPC?

The MPC sets monetary policy for banks in the country through decisions on the Monetary Policy Rate (MPR), Cash Reserve Ratio (CRR) and Liquidity ratio. These variables, in turn, determine the quantum of funds that the banks have at their disposal to lend. The MPR is the rate at which the CBN lends to banks. This, in turn, determines the interest rate banks charge members of the public.

The MPC comprises the governor of the Bank who shall be the chairman; the four deputy governors of the Bank; two members of the board of directors of the Bank; three members appointed by the president; and two members appointed by the governor

Why were the rates left unchanged?

In remarks read during the meeting, CBN Governor Godwin Emefiele stated that the Committee was of the view that further tightening (increasing the rates) could potentially dampen the positive outlook for growth and financial stability.  Loosening (lowering rates), on the other hand, would reduce the cost of borrowing, but lead to a rise in consumer prices, generating exchange rate pressures and increased importation.

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Plainly put, increasing rates would have hurt an economy just recovering from a recession. Nigeria recorded a 0.83% GDP growth in 2017, signalling a recovery from recession, albeit weak.  Lowering rates, on the other hand, could further increase inflation and encourage importation, which would hurt local industries.

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How does the Hold on interest rate affect you ?

For Borrowers

The status quo remains unchanged. An increase in interest rates would have led to an increase in lending rates. A decrease in interest rates would have lead to a drop in the cost of borrowing.

For Investors

An increase in interest rate would have led to an outflow of funds from the capital market. A drop in the interest rate would have led to an inflow of funds into the capital market, from investors seeking higher returns.

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An increase in interest rate would also have led a rise in the yields on treasury bills and vice versa.


A change in rates would also have varying effects on different firms held by investors on the Nigerian Stock Exchange (NSE). An increase in interest rates tends to benefit banks through a higher interest income and yield on government securities. FMCGs and other firms would have increased borrowing costs, had the rates being increased.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via


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