MPC retains lending rate at 14% to consolidate forex gains, macro-economic reforms

In an effort to consolidate on the mileage recorded by the nation’s economy and deepen its impact, members of the Monetary Policy Committee( MPC) of the Central Bank of Nigeria(CBN), on Tuesday, voted to retain the monetary rate at the end of its meeting for 2017. Consequently, the MPC retained the Monetary Policy Rate (MPR) at 14%, CRR at 22.5%, Liquidity Ratio at 30%, and the Asymmetric Window at +200 and -500 basis points around the MPR.

MPC’s decision to hold rates unchanged was ratified by eight members against one, Central Bank of Nigeria( CBN) governor Mr. Godwin Emefiele announced yesterday in Abuja, while briefing the media on the MPC’s outcome. According to the apex bank’s boss, the Committee appraised potential policy options in terms of the balance of risks, and took note of the gains made so far as a result of its earlier decisions.

This, according to the CBN governor, included the stability in the foreign exchange market and the moderate reduction in inflation; and arrived at the decision to hold the monetary policy alongside the some parameters.

Emefiele explained that while tightening would strengthen the impact of monetary policy on inflation with complementary effects on capital inflows and exchange rate stability, it nevertheless could also potentially dampen the positive outlook for growth and financial stability. He said the MPC further noted that, whereas, loosening would strengthen the outlook for growth by stimulating domestic aggregate demand through reduced cost of borrowing, it could aggravate upward trend in consumer prices and generate exchange rate pressures.

“The Committee also feels that loosening would worsen the current account balance through increased importation. On the argument to hold, the Committee believes that key variables have continued to evolve in line with the current stance of macroeconomic policy and should be allowed to fully manifest.

Members noted that the developments in output and inflation in particular required effective close monitoring in order to gain clarity on the medium term optimal path of monetary policy,” he added.

Mathew Dadiya, Nafisa Abubakar, Abuja