With the inflation rate at 17.33 per cent, a three year high, the Central Bank of Nigeria (CBN) has retained the benchmark interest rate at 11.5 per cent.
It was in September 2020 that the CBN reduced the interest rate and inflation rate which was 13.22%.
The CBN Monetary Policy Committee (MPC) at its meeting on Tuesday voted to retain the Monetary Policy Rate (MPR) at 11.5%; retained the asymmetric corridor of +100/-700 basis points around the MPR; retain the CRR at 27.5 per cent, and retain the Liquidity Ratio at 30%.
Briefing journalists after the meeting, CBN Governor Godwin Emefiele, said: “The consensus among MPC members was that, given that inflation is substantially a supply-side phenomenon, there is need to continue to focus on consolidation on the recovery process, by taking those actions that would continue to stimulate output growth, create employment, but at the same time have an eye on an effort to moderate the inflationary pressure; using the current administrative measures being adopted by the Bank in controlling monetary aggregates in the banking system.”
The committee according to the governor reckoned that that tightening will hike the cost of capital and hamper investments required to create employment and continue to boost recovery.
He also said part of CBN interventions to stimulate the economy with the COVID-19 is a N1 trillion Manufacturing Intervention Stimulus, from which N803.36 billion has been disbursed to 228 projects.
He also said the apex bank has disbursed more funds including N1.487tr agric fund as of February 2021; N218bn Targeted Credit Facility; N111.6bn AGSMEIS fund, N3.19bn for Creative Industry Financing Initiatives, N33.4bn for National Mass Metering Programme, and N89.89bn for the Nigeria Electricity Market Stabilisation Facility (NEMSF 2) to 11 distribution companies to improve the electricity supply industry in Nigeria.
Commenting, Uche Uwaleke, a professor of the capital market said, regarding the MPC decision to hold rates, this was largely predicted.
“While a reduction in MPR was not an option given rising inflation and exchange rates pressure, increasing MPR could roll back modest progress made in the area of credit to the real sector and economic recovery generally. So the best decision under the circumstance was to hold rates and rely more on development Finance functions to stimulate economic growth.
“So, the MPC’s decision is consistent with global trends among central banks,” he said.
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