Central Bank’s Monetary Policy Committee leaves MPR unchanged for third time

The Central Bank of Nigeria’s Monetary Policy Commitee (MPC) has voted to to leave the Monetary Policy Ratio (MPR) unchanged for the third time, this comes as the committee concludes its second meeting for the year 2017, which held on March 20 and 21. At its last meeting which was concluded on January 24, members of the committee voted to retain the Monetary Policy Ratio MPR at 14 per cent, alongside other monetary policy parameters.

Faced with a contracting economy, surging inflation and a rigid exchange rate, Nigeria’s central bank opted to keep its key interest rate unchanged on Tuesday, much to analyst expectations.  

The Monetary Policy Committee led by Governor Godwin Emefiele has now held the policy rate at 14 percent since July, while the cash reserve requirement remained at 22.5 percent.   

“In consideration of the headwinds in the domestic economy and global factors, nine out of ten members voted to leave all key rates unchanged, Godwin Emefiele, the CBN governor said.

Pointing to core inflation rate slowing for the 3rd consecutive month in February, some analysts were getting comfortable in seeking a cut in the monetary policy rate; but it wasn’t to be.

“The recently released Economic Recovery and Growth Plan, the new foreign exchange policy and the on-going efforts by the federal government to broker peace in the Niger-delta will help revive economic growth and stabilise prices,” Emefiele said.

Foreign-exchange policy has become a common agenda-item for the committee as the nation maintains a managed currency float and has stopped importers of goods it deems non-essential from buying dollars on the official market. While this has contributed to a rapid increase in consumer prices, Emefiele said on March 11 that allowing the naira to freely float will hurt the economy, which shrank by 1.5 percent last year, the first contraction since 1991.

“They won’t cut because inflation remains high, and they won’t hike because that will undermine growth,” Yvonne Mhango, an economist at Renaissance Capital, said in an emailed response to questions. They will only “adjust upwards, if they allow for more flexible foreign-exchange policy that results in the naira weakening.”