Again, MPC retains interest rate at 14%

For the 11th time, members of Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) yesterday retained all rates.
Experts predicted the rates to remain unchanged until after the general elections in 2019.
Rising from its 262nd Meeting in Abuja, the CBN’s Governor, Mr Godwin Emefiele who doubles as the Chairman of the Committee said, the MPC voted to retain the: MPR at 14.0 per cent; CRR at 22.5 per cent; Liquidity Ratio at 30.0 per cent; and Asymmetric corridor at +200 and -500 basis points around the MPR.
Informed by the developments in the global and domestic economic and financial environments, the Committee painstakingly reviewed the policy options available, according to him.
In particular, the Committee considered the sustained positive growth in real GDP over the last quarter, stability in the foreign exchange market and high level of accretion to the external reserves.
The MPC deliberated on the rise in food inflation, impact of the expected liquidity from expansionary 2018 FGN budget and rising FAAC disbursement in the second half of the year along with the build-up in pre-election year spending.
The Committee strongly considered the option of tightening believing that tightening would curtail the threat of a rise in inflation, even as the injection from the fiscal authorities would still provide the economy with substantial liquidity.
Notwithstanding the deceleration in headline inflation, the current double digit inflation rate remains above the Bank’s 6-9 per cent target range.
In addition, the Committee was of the view that tightening would help stem the tide of capital flow reversals in the face of sustained monetary policy normalization in the US.
This, the Committee believed would rein-in inflationary pressure and moderate inflation rate to single digit, increase real interest rate, build investor confidence with attendant positive impact on capital inflows and further stabilize the country’s exchange rate.
Consequently, external reserves stood at $47.2 billion on July 23, 2018.
The Committee was optimistic and expected further increases in the level of external reserves in the near term, citing the favourable crude oil prices.
The Committee, therefore, advised the Bank to sustain its current efforts to maintain investor confidence and ensure accretion to external reserves.