- CBN Leaves Interest Rate Unchanged at 13.5%
The Central Bank of Nigeria led Monetary Policy Committee left the interest rate unchanged at the Monetary Policy Committee meeting held on Monday 25th and Tuesday 26th November 2019.
The eleven-member committee unanimously voted to retain the Monetary Policy Rate at 13.5 percent; retain asymmetric corridor at +200/-500 basis points around MPR; retain the CRR at 22.5 percent, and retain the Liquidity Ratio at 30 percent.
According to the committee, the decision was due to a number of efficient directives despite the high unemployment rate and sustained global uncertainty.
They highlighted the 65 percent Loan-to-Deposit ratio that is aiding credit to the private sector as key to job creation and self-sufficient, especially with the border closure.
“Growth in credit to the private sector, however, improved to 13.08 percent in October 2019 from 12.49 percent in the previous month, reflecting the impact of the Bank’s recent policy on loan-to-deposit ratio. An increase in absolute gross credit, amounting to N1,169.70 billion, was recorded between end-May and end-October 2019,” the committee stated.
While the committee noted the surge in inflation from 11.24 percent in September to 11.61 percent in October, they said its a temporary food supply shock due to the border closure.
The Committee noted that “any upward price movement arising from the closure was reactionary and therefore temporary. Moreover, significant investment has been made over the last three years to sustainably increase domestic food supply.”
Therefore, the committee agreed to leave rates unchanged despite falling capital importation.
“While tightening may encourage capital inflows, it also has the downside consequence of constraining the already nascent recovery in output growth. The Committee also noted that a reduction in the policy rate will improve growth prospects but in view of the uptick in inflationary pressures, it decided that the balance of risks was in favour of protecting price stability.”
