MPC keeps rate at 14% for the seventh session in a row

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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Tuesday, July 25th, 2017 rounded up her fourth meeting of the year with the following decisions;

  • Retained the Monetary Policy Rate (MPR) at 14.0%
  • Maintained the Cash Reserve Ratio (CRR) at 22.5%
  • Retained the Liquidity Ratio (LR) at 30.0% and
  • Maintained the asymmetric window around the MPR at +200bps/-500bps.

Recall that in our Economic Brief on CPI June 2017, we anticipated that the MPC would maintain status quo on all rates as result of positive economic developments in recent time and also to allow time for the implementation of 2017 Budget which was passed into law by the National Assembly in late June. In opting to maintain the basic policy rates, the MPC granted our narrative. The last time rate was reviewed was a year ago when it moved from 12% to 14%.

Though, the MPC acknowledged the challenges that confronts the economy going forward, such as;

  • The continued negative growth in the economic space
  • Expected low oil prices due to renewed investments in US shale oil exploration and production and increased in oil supply
  • Anticipated strengthening of the US dollar
  • Continued high inflationary pressure
  • Weak DMBs’ credit facility to the real sector and
  • Yet to be diminished demand pressure in the FX market

but opted to consolidate on the recent positive development in the economy especially the FX policy that has seen disparity between the official and parallel rates shelved 0.82% as at July 25th compared to the previous decision date in May. The recent FX policy is designed to improve liquidity, confidence and stability of foreign exchange market.

 

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