CBN-MPC Leaves Rates Unchanged

• CBN-MPC Leaves Rates Unchanged

The Central Bank of Nigeria led Monetary Policy Committee left interest rates unchanged on Tuesday as the apex bank looks to sustain capital inflow and enhance economic recovery

The committee unanimously retained the Monetary Policy Rate at 13.5 percent, saying the recent efforts of the Central Bank to push Deposit Money Banks to increase credit facility to the private sector through the 60 percent Lending-to-Deposit ratio directive necessitate the committee maintaining the current interest rate as it would help control possible surge in money supply.

The committee also stated that since interest rates are dropping, it is important to await the full impact of these new policies before a review of the monetary policy position is done.

The committee retains the asymmetric corridor at +200/-500 basis points around the MPR, while the CRR was retained at 22.5 per cent and the Liquidity Ratio maintained at 30 per cent.

However, emphasis was placed on output increase through consumer credit, mortgage loans and Small and Medium Enterprises loan support.

Deposit Money Banks are therefore advised to build a reliable credit scoring system like advanced economies to mitigate credit risk.

This was in response to experts’ opinions that the new LDR will increase the size of non-performing loans and exposed banks to more risk in a period when the Central Bank does not have the liquidity to rescue financial institutions. Another indication of CBN determination to increase economic productivity through new investment and job creation.

Also, while the committee expressed concerns over the current bearish trend in the Nigerian Stock Exchange market, they do not proffer solutions but pointed to portfolio reallocation from equities to fixed-income securities as the main reason. Suggesting that the CBN is either comfortable with the current policy and do not concern itself with investors confidence or just doesn’t have the tools to address the situation and boost investors’ confidence.

Analysts at Investors King Ltd projected that the apex bank will maintain the current rates given the needs to sustain capital importation and support the Naira.

But with President Buhari forwarding ministerial nominees to the National Assembly today, business confidence is likely to rebound and the stock market experience a renew buyers’ interest as investors are expected to start jumping in for a better deal.