CBN retains MPR at 13.5%, maintains other policy parameters
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has retained Monetary Policy Rate (MPR) at 13.5 per cent and maintained other policy parameters constant.
CBN Governor, Godwin Emefiele, stated this in a communique issued at the end of the 272nd MPC meeting in Abuja on Tuesday.
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The CBN governor stated that the committee also decided to retain Asymmetric Corridors of +200 -500 bp around the MPR as well as retained Cash Reserve Ratio (CRR) at 27.5 per cent and Liquidity Ratio at 30 per cent.
He explained that after weighing the options of tightening, loosening or to hold, the committee while taking the decision took cognisance of the need to address unfolding and unfavourable micro economic development and also allow previously announced interventions time to manifest.
He added that in taking the decision, the committee noted the fact that the CRR was increased at the last MPC meeting.
“The choice to hold considered the subsisting loan to deposit ratio and the CRR policies which sterilised excess liquidity in the banking system hence an increase in the MPR would have been counterproductive.
“The CRR was increased at the last MPC meeting, time is required for its full effects to be manifest. Increasing the MPR would be contradictory to the recent reduction of interest rates in the CBN intervention programmes.
“An increase in MPR would be taken by deposit money banks as an invitation to increase lending rates and this would be unfavourable at this point in time when efforts are being made to avert a recession. A reduction in MPR would not make the DMBs to reduce lending rates,” he said.
He said time was required for its full effect to be manifested pointing out that increasing the MPR would contradict the recent reduction in the interest rates of CBN intervention programmes from nine to five per cent.
“Besides an increased in MPR will be taken by Deposit Money Banks (DMBs) as an invitation to increase lending rate and this will be most undesirable at this point in time when efforts are being made to avert a recession.
“Another reason is that a reduction in MPR will not make DMBs to reduce lending rate but other CBN strategies are making DMBs to reduce the lending rates in furtherance of the growth objective,” the CBN governor added.
Emefiele said the MPC also observed the continued rise in domestic prices, low oil prices in the wake of oil global shock, exchange rate pressure and other domestic and fiscal responses in the evolving crisis.
He said taking note of the different factors, the committee unanimously voted to retain MPR and hold other policy parameters constant.
