Nigeria’s Monetary Policy Rate Sustains at 11.5%
The Nigeria’s monetary policy rate has been sustained after two-day deliberation weighing the pros and cons for adjustment to parameters.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held its sixth meeting of the year on the 23rd and 24th of November, 2020.
The Committee reviewed the developments in the global and domestic environment in the past few months, particularly the impacts of COVID-19 and lower crude oil prices on the Nigerian economy, which led the country into recession.
MPC also reviewed the global and domestic financial environments in the past few months as well as the outlook and risks for the remaining period of 2020.
All the members of the committee were in attendance and they considered the option of either to increase, retain or cut the rates.
While benchmark interest rate has been sustained at 11.5%, the Committee also retain asymmetric corridor at +100/-700 basis points around the MPR.
In addition, Cash Reserve Ratio (CRR) remained at 27.5% just as the liquidity Ratio at 30.0%.
Commenting, analysts at PAC Capital said the decision was in line with our expectation.
PAC however added that reducing the MPR would increase economic productivity and likely help the economy out of recession, this may not be in line with the reality of current inflation rate of 14.23% as at October 2020.
Again, if the CBN increase the MPR, this will be in line with the reality of current inflation rate and address the issue of negative real interest rate in the country.
However, this will adversely affect the economic productivity and keep the country in recession.
“In our opinion, the CBN has prepared for the economic recession, especially during the lockdown, with various Intervention Funds”, PAC Capital said.
Recall that in the last MPC meeting, the CBN reduced the MPR by 100 bps and retaining it now would not create policy conflict in the economy.
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However, to bring the economy out of recession quickly, we expect complementary effort from the fiscal authority.
