The Central Bank of Nigeria (CBN) on Tuesday assured that it has the capacity to sustain the gains which the naira has made in the last few weeks. The governor of the CBN, Godwin Emefiele gave the assurance just as the Monetary Policy Committee (MPC) retained its bench mark interest rate at 14 percent on fears that any policy shift could worsen inflation, interest and exchange rate gains.
The apex bank also left the Cash Reserve Ratio unchanged at 22.5 percent, Liquidity Ratio at 30 percent as well as the asymmetric corridor around the MPR at +200 basis points and -500 basis points.
Emefiele warned that those taking a bait on the naira would loose “real big.”
CBN governor, Godwin Emefiele who announced the decision after the two days meeting of its Monetary Policy (MPC) said retaining rates was most suitable at this time to sustain slight improvements in inflation, exchange rate and particularly so that the bank will not be seen as being insensitive to the present tight economic conditions.
“The benefits of loosening at this term which would be in line with the plans of the fiscal policy to resart growth. The MPC however notes that loosening will exacerbate inflationary pressure, worsen exchange rate and further pull the real interest rate into negative territory. Since interest rates are sticking downwards, loosening may not necessarily transmit into lower retail lending rate,” Emefiele stated.
CBN’s decisons align with many analysts expectations. Inflation stood at 17.78 percent in February, the lowest in 15 months. Though the country still remains in recession, economy contracted slower than the previous months by -1.30, according to from figures National Bureau of Statistics (NBS), raising hope of recovery in 2017.
The CBN is also optimistic that the newly release Economic Growth Recovery Plan will help fastback growth.
