The Central Bank of Nigeria (CBN) has held the benchmark interest rate (Monetary Policy Rate) at 11.5 per cent just as it worries that the parallel foreign exchange (forex) market was promoting corruption.
The CBN Governor, Mr. Godwin Emefiele gave the indication on Tuesday during the post Monetary Policy Committee (MPC) briefing held virtually.
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On voting to hold the rate, the MPC reckoned that: “The Committee was of the view that this will be beneficial as it will allow current policy measures to permeate the economy while observing the trend of developments. The Committee also felt that the heterodox policies of the Bank targeted at various sectors are showing positive results that would further engender growth.”
The CBN also kept the asymmetric corridor, from +200/-500 to +100/-700 basis points around the MP, retained CRR at 27.5% and retained liquidity ratio at 30%.
Mr. Emefiele on his part said because the parallel market is fuelled by corruption, it is not a credible market to hinge the true exchange rate position of the naira.
At the parallel market in Abuja, the naira currently trades at about N485/$1 at the parallel market as against the N380 /$1.
“People begin to create panic by saying the exchange rate is N480/$1. But on our side, we will continue to insist that the exchange rate is determined by forces of demand and supply in the forex market.
“We don’t agree that the determining factor for the value of our currency should be based on the market that is tainted, a market where people go to offer bribes,” he said.
Emefiele indicated that in taking the decision, the Committee focused not only on price stability, but also on the need to speedily take actions to exit the recession.
He also said the CBN is optimistic the economy will post a little positive GDP from the fourth quarter 2020 and full recovery by first quarter 2021.
The Committee, however, noted that the rise in inflation will likely abate in the medium term, as domestic production is expected to recover, following the resumption of economic activities post-COVID-19 lockdown.
In addition to this, the CBN indicated that food inflation is expected to moderate as harvest season sets in.
The Committee recognized the supportive developmental roles of the CBN towards addressing some of the structural issues in the economy.
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