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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has kept the Monetary Policy Rate (MPR) constant at 13.50%. Also, other parameters such as Cash Reserve Ratio (CRR), Liquidity ratio, and asymmetric corridor remain unchanged.

The Governor of CBN, Mr. Godwin Emefiele, disclosed this while reading the communique at the end of the two-day MPC meeting on Tuesday in Abuja.

According to Emefiele, the decision of the MPC to hold all rates was informed by the conviction of the committee members that key macroeconomic indicators were trending in the right direction.

Highlights of the Committee’s decision

  • MPR was kept at 13.50%
  • The asymmetric corridor of +200/-500 basis points around the MPR was retained.
  • CRR was held at 22.5%
  • The Liquidity Ratio was also kept at 30%

Late budget cycles, food price hike fuel MPR retention - Experts 

Reasons for keeping MPR constant

While considering the upsides and downsides of the options to tighten, hold or loosen, the MPC noted that while tightening might encourage capital inflows, it also has the downside consequence of constraining the already nascent recovery in output growth.

  • On loosening the MPR, the MPC noted that a reduction in the policy rate would improve growth prospects, but in view of the uptick in inflation partly due to border closure pressure, a balance of risks was in favour of protecting price stability.
  • In considering to hold MPR, the MPC noted the in line with the on-going recovery in the economy and the decline in market interest rates, growth in domestic credit amongst other positive developments, there would be more gains in the short to medium term in holding policy at its current position.

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Banking Sector policy actions

While further justifying the reason for holding rates going into the year 2020, the MPC noted that recent policy actions in the banking sector were already showing positive outcomes. Policy actions stated by the MPC include the current policy on loan-to-deposit ratio, which according to the committee had resulted in loans and advances rising by over N1.1 trillion between June to October 2019.

  • It further noted that these actions had assisted in boosting credit to the agricultural and manufacturing sectors, hence, the positive outcome on the GDP.
  • Also, the MPC noted that expectations were high for the LDR initiative to be sustained as interest rates being paid by borrowers have so far dropped by up to 400 basis points between June and October 2019.
  • According to the MPC, the drop in interest rates paid by borrowers happened with the corresponding decline in Non-Performing Loans (NPLs) to 6.5% at the end of October 2019.

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The Bottom line: In its decision, the MPC was of the view that sustaining the MPR at its current level is crucial for a better understanding of the unfolding impetus of growth before deciding on any probable variations.

  • The MPC also felt that holding its current policy position offers pathways for appraising the effect of the heterodox policies to encourage lending by the banking industry without varying the policy rate as the downside risk to growth and caution on inflation looks stable.
  • Lastly, the MPC was of the view that the improvements in the macroeconomic indicators such as the GDP, NPLs, CAR, and the LDR, suggest that the current monetary policy stance is yielding results.


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