Nigeria’s Monetary Policy Committee Leaves Interest Rates Unchanged

The Central Bank of Nigeria-led Monetary Policy Committee (MPC) left the benchmark interest rate unchanged at 11.5 percent at the just concluded monetary policy meeting held in Abuja on 22 and 23, November 2021.

The 10 members committee voted unanimously to retain all key parameters at current rates as follow:

Retain the MPR at 11.5 percent;
Retain the asymmetric corridor of +100/-700 basis points around the MPR;
Retain the CRR at 27.5 percent; and
Retain the Liquidity Ratio at 30 percent.

Explaining why the MPC left rates unchanged, the committee said though it was upbeat about the ongoing economic recovery, tightening would increase the cost of funds and constrain output growth at a period when the economy needs access to capital to spread up the recovery process, create jobs, deepening growth and support productivity in general.

On the other hand, the committee assesses it possible effect of loosening monetary policy on the economy, though it will ease liquidity pressures, and stimulate additional credit creation which will boost output growth, “MPC also thinks that loosening will further widen the negative real interest rate gap and compounded the price distortions in the money markets which could fuel inflationary pressures.”

The MPC believes that the existing monetary policy stance has supported the growth recovery and should be allowed to continue for a little longer for consolidation to achieve the MPC mandate of price stability that is conducive for sustainable growth.

The Committee also feels that a hold stance will enable it to carefully appraise the implications of the unfolding global development around policy tapering and normalization by advanced economies.

This, it said will support the noticeable growth in the Gross Domestic Product in the third quarter. Nigerian economy expanded at 4.03 percent in the third quarter, below the 5.01 percent achieved in the second quarter. Nevertheless, it validated the central bank’s ongoing policy on the economy.

The committee, therefore, urged the apex bank to sustain its ongoing intervention programs in the real sector.