CBN Leaves Interest Rates Unchanged

The monetary Policy Committee (MPC) led by the governor of the Central Bank of Nigeria, Godwin Emefiele on Tuesday said the conditions that led to the economic contraction in the first quarter of the year were still largely unresolved and as such recession which was signaled in July 2015, now appears imminent.

The governor said the committee had decided to leave monetary policy rate unchanged at 12 percent and cash reserve ratio at 22.5 percent. Also, liquidity ratio was held at 30 percent. Emefiele said the apex bank need to monitor previously implemented policy before making any further rate adjustment.

Since the committee increased monetary policy rate by 100 basis points from 11.00 percent to 12.00 percent and cash reserve ratio by 250 basis points from 20.00 to 22.50 percent to attack surging inflation rate. Inflation has gone up to 13.7 percent and unemployment rose to 12.1 percent, signaling potential recession.

In an effort to arrest the situation, the committee “introduce greater flexibility in the inter-bank foreign exchange market structure and to retain a small window for critical transactions.”

The governor said the central bank would unveil plans for the flexible exchange rate system soon, adding that implementation of the 2016 budget will further reflate the economy.

The Nigerian Stock Exchange (NSE) All-Share Index rose 0.88 percent to close at 27,231.50, while market capitalisation added N74.02 billion to close at N9.35 trillion on Tuesday.