Nigeria’s Monetary Policy Committee Leaves Rates Unchanged to Rein In Prices

The Central Bank of Nigeria (CBN) led Monetary Policy Committee (MPC) left interest rates unchanged on Tuesday to better address Nigeria’s rising consumer prices and other factors impacting economic activities.

The nine-member committee did not vote unanimously as two members voted to raise rates by 25 basis points while one voted that rates be raised by 50 basis points. The remaining six members voted to maintain current parameters as follows:

• Retain the Monetary Policy Rate 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.

Breaking down the modalities for its decision, the committee said the surge in the price of petroleum and other products due to the ongoing war in Ukraine is having a negative effect on the purchasing power of Nigerians and the cost of living in general.

The committee admitted that before the war, it was optimistic that consumer prices will continue to moderate with improvements across key sectors. However, the Russia-Ukraine war and unexpected fuel scarcity escalated inflation to 15.70% in February, forcing the MPC to adjust its monetary stance to accommodate current economic realities.

MPC said “Before the Russia-Ukraine war, MPC was optimistic that the moderate decline in inflation was sustainable due to the positive impact of good harvest on price levels. The MPC worries that, whereas global prices have gone up, this has been compounded by the shortage of supply of petroleum products. In the short run, MPC urges NNPC to take urgent steps to ensure an adequate supply of petroleum products in Nigeria so as to reduce the rate of arbitrary increase in the price of petroleum products by oil marketers.”

Investors King noted with concerns that the committee is now relying on the proposed take-off of the Dangote Refinery to address the nation’s persistent fuel scarcity and chronic forex challenges.  It presently does not have solutions for the rising insecurities and oil theft debilitating the nation’s reserves and other resources.

“MPC is hopeful that the proposed take-off of the Dangote Refinery in the course of the year would help to improve the supply of petroleum products in Nigeria,” the committee stated.