The Monetary Policy Committee of the Central Bank of Nigeria has voted to hold all monetary parameters constant, keeping the benchmark interest at 11.5% despite growing inflationary pressure in the country.
This was disclosed by the Governor of the CBN, Godwin Emefiele, while reading the communique of the first monetary policy committee meeting of the year, on Monday 21st March 2022.
Highlights of the Committee’s decision
- MPR retained at 11.50%
- The asymmetric corridor of +100/-700 basis points around the MPR was retained
- CRR was retained at 27.5%
- While Liquidity Ratio was also kept at 30%
Nigeria’s inflation rate rose to 15.7% in February 2022, largely attributed to the uptick in core inflation from 13.87% recorded in January 2022 to 14.01% in the review month. The rise of the core inflation was due to the surge in energy prices, which was exacerbated by the electricity blackout across the country.
The Central Bank while commenting on its outlook for global economy, the governor, Godwin Emefiele suggested that inflation is expected to be on the rise, on the back of continuous rise in energy prices and could only be contained if the Russia-Ukraine war can be addressed as soon as possible.
However, the MPC based on a majority, voted to hold the rates constant, as it believes a move to tighten interest rate at this time could be counter-productive for the nation’s economy following the uncertainty in the global economy as a result of the Russia-Ukraine faceoff.
The committee’s considerations
The Committee noted the impact that the global price increase in and other products is having practically on all economies.
The MPC also noted that this has resulted in imported inflation on the Nigerian economy and believes that specific actions need to be taken to ensure that this trend does not continue given the adverse consequences and aggressive rising price level could have on the cost of living and purchasing power of Nigerians.
However, in the medium-term, MPC is hopeful that the proposed take-off of the Dangote Refinery in the year would help to improve the supply of petroleum products in Nigeria.
The Committee noted the impact that the global price increase in and other products is having practically on all economies.
The MPC also noted that this has resulted in imported inflation on the Nigerian economy and believes that specific actions need to be taken to ensure that this trend does not continue given the adverse consequences and aggressive rising price level could have on the cost of living and purchasing power of Nigerians.
Although MPC is relieved that food inflation declined marginally due to good harvest, with some scarcity expected as we approach the planting season, the Committee is optimistic that with the high level of strategic grain reserves of the CBN, it is relieved that food prices would remain relatively moderated.
While growth has continued to improve, members noted that inflation was confronted with upward pressure due to emerging risks within the domestic and external environment.
The MPC, however, noted that the substantial upward push to price levels continued to be influenced by supply persisting insecurity and side factors such as the scarcity of PMS, persisting insecurity and backlash from the Russia-Ukraine war. These require a careful and focused policy intervention to address and resolve.
The Committee decided to adopt a hold stance as it would indicate a precautionary and consistent policy stance with the prevailing economic conditions particularly as further economic and financial shocks are exerted from the ongoing Russia-Ukraine war.
What this means
- The CBN’s monetary policy committee maintaining its monetary policy to hold the benchmark interest rate at 11.5% and other parameters constant, is aimed at ensuring Nigeria’s economic recovery continues in the positive trajectory.
- This is despite the possible risk of further inflationary pressure following the current energy crisis amid the sustained Russia-Ukraine war.
