The Central Bank of Nigeria (CBN) on Tuesday retained its benchmark interest rate, known as the Monetary Policy Rate (MPR), at 11.5 percent after the two-day Monetary Policy Committee (MPC) meeting in Abuja, citing inflation concerns.
This comes not as a surprise as analysts in the financial services sector had expected a hold following persistent uptick in inflation rate and weak growth.
Nigeria’s inflation rose to 17.33 percent in February 2021 from 16.47 percent in January 2021, according to data from the National Bureau of Statistics (NBS).
In the fourth quarter of 2020, Nigeria’s economy sluggishly recovered from a recession it slipped into in the second quarter (Q2) of 2020 – after output contracted for two consecutive quarters.
Real GDP grew by 0.11 percent in the fourth quarter of 2020, from -3.62 percent in Q3 2020, according to NBS data.
The CBN also retained the Cash Reserve Ratio (CRR) at 27.5 percent, Liquidity Ratio at 30 percent as well as the Asymmetric Corridor around the MPR at +100/-700 basis points.
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Given the fact that the rise in inflation has been due to cost-push factors rather than demand pull factors, Godwin Emefiele, governor of the CBN, said the Monetary Policy Committee has placed greater weight on utilising tools that would strengthen the nation’s productive base as a nation.
Taiwo Oyedele, head of Tax and Corporate Advisory Services at PwC, had said the rising inflation would be of concern to the MPC as it does not support any expansionary policy changes. He said a contractionary policy adjustment would hurt the fragile economic growth and recovery.