Why Nigeria's policy-setting committee retained interest rate at 13.5%

CBN Governor, Godwin Emefiele
  • CBN MPC retains key lending rate at 13.5%.
  • CBN governor, Godwin Emefiele says 9 out of the 11 members that attended the meeting agreed to retain the current monetary policy stance.
  • CBN MPC believes that maintaining the monetary policy rate at its present level was “essential for better understanding of the momentum of growth before determining any possible modifications.” 
  • This will help the country to tame inflationary pressures as headline inflation rose to 11.37% in April 2019.

The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) has retained the key lending rate at 13.5% to “better understand the momentum of growth before determining any possible modifications.”

This is the first meeting to be presided over by Godwin Emefiele, the CBN governor after his re-appointment for another five-year term.

In a post-meeting conference in Abuja on Tuesday, Emefiele said 9 out of the 11 members that attended the meeting agreed to retain the current monetary policy stance.

He said the policy-setting committee also held other parameters constant with Cash Reserves Ratio at 22.5% and retain liquidity ratio at 30%.

The MPC decided against the backdrop of these developments by a vote of nine members out of eleven, to hold all parameters of MPC constant. Two members voted, however, to reduce the MPC by 25 basis points."

In a post-meeting communique seen by Business Insider SSA by Pulse, the CBN MPC believed that maintaining the monetary policy rate at its present level was “essential for better understanding of the momentum of growth before determining any possible modifications.” 

The members also said it will provide an avenue for evaluating the impact of the CBN's intervention policies to support lending to the priority sectors of the economy. 

In summary of the decision:

  • Retain the MPR at 13.50%
  • Retain the asymmetric corridor of +200/-500 basis points around the MPR; Retain the CRR at 22.5%;
  • Retain the Liquidity Ratio at 30%.

Maintain a status quo at this point will help the country to tame inflationary pressures. In April, the headline Inflation rate rose marginally to 11.37% in April from 11.25% recorded in March 2019, according to the National Bureau of Statistics.

In simple term, the outcome will maintain the borrowing rate in the economy and allow the apex bank to study macroeconomic policies.

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