By Modupe Gbadeyanka
The Central Bank of Nigeria (CBN) has again failed to tamper with the Monetary Policy Rate (MPR), leaving it unchanged at 14 percent.
At the end of its Monetary Policy Committee (MPC) meeting on Tuesday, January 24, 2017, the apex bank noted that reducing the MPR could have an adverse effect on the economy, presently in recession, but already on its way to recovery.
Reading the committee’s communiqué after the meeting, the CBN Governor, Mr Godwin Emefiele, explained that the MPR was left alone at its present rate “in consideration of the headwinds in the domestic economy and the uncertainties in the global environment.”
However, he stressed that the rate would be reduced “when the conditions permit.”
According to the committee, “inflationary pressures would begin to subside as non-oil output recovers and the Naira exchange rate stabilizes.
“Until then, it stressed, a rate cut would worsen the inflationary conditions and undermine the current outlook for stability in the foreign exchange market.
“The Committee also feels that doing so would further aggravate demand pressures while undermining existing income levels in the face of the already expansionary monetary policy and increasing inflationary pressure which will make the economy unattractive for foreign and domestic investment.”
It noted that, “Given these limitations, the Committee was reluctant to lower the policy rate on this occasion but remained committed to doing so when the conditions permit.”
Also, the committee unanimously agreed to retain the CRR at 22.5 percent; retain the Liquidity Ratio at 30.00 per cent; and retain the Asymmetric corridor at +200 and -500 basis points around the MPR.
