CBN retains MPR at 14% to reinforce stance on taming inflation

The Central Bank of Nigeria (CBN) on Tuesday left its benchmark lending rate, the Monetary Policy Rate unchanged at 14 percent, a decision which strongly reinforces its preference for taming soaring prices over pushing growth expansion.

The CBN also retained the Cash Reserve Ration (CRR) at 22.5 percent, Liquidity Ratio at 30 percent and Asymmetric window at +200 and -500 basis points around the MPR.

Nigeria’s Gross Domestic Product (GDP) in the third quarter, 2016 contracted 2.24 percent and equally grew negatively for three straight quarters in the year, according to figures from National Bureau of Statistics (NBS) released on Monday.

Inflation has also unfortunately moved up to 18.3 percent and had been in an upward trend since beginning of the year.

Some analysts had expected some rate easing to spur growth but the governor of the CBN, Godwin Emefiele acknowledged that outlook for growth and inflation in the medium term continues to be challenging, but the factors instigating them are largely outside monetary policy.

“Risks remain highly elevated on both price and output but that considering the importance of price stability and being mindful of the limitations of the monetary policy in influencing output and employment under the conditions of stagflation,” the governor stated, announcing the outcome of the Monetary Policy Committee (MPC) meeting in Abuja,

He also observed that the present key undercurrent, including shortage of a foreign exchange, low fiscal activity, high energy prices, and the accumulation of salary arrears especially at the subnational level of governments continued in the third quarter of the year

“Members noted that those conditions  could not have been ameliorated directly with monetary policy instruments, but however recognised the need to continue to set monetary politics in such a way as to enable fiscal policy the required space to improve public investment in public infrastructure.”

Emefiele had at the weekend – though in his own personal views- signalled that rates could be retained because according to him, it would make no sense easing rates at a time of soaring prices.