The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), at its 305th meeting on Wednesday, voted on policy parameters to retain the Monetary Policy Rate (MPR) at 26.5 per cent.
This marks a shift from the Committee’s aggressive tightening stance informed by its inflation-targetting posture.
The CBN Governor, Yemi Cardoso, presented the communique from the meeting.
Cardoso announced that the MPC also retained the Cash Reserve Ratio (CRR) at 45 per cent for commercial banks, 16 per cent for merchant banks, and 75 per cent for non-TSA public sector deposits.
He said that Standing Facilities Corridor was also retained at +50 / -450 basis points around the MPR.
The CBN Governor also said that Nigeria’s macroeconomic fundamentals remain resilient enough to support a gradual return to lower inflation.
Cardoso said that the decisions of the MPC were anchored on a comprehensive assessment of risks to the outlook.
According to him, although inflation has risen marginally for two consecutive months, largely induced by external shocks, the MPC recognised its transitory nature.
He said that the Committee remained confident that the current macroeconomic environment was sufficiently robust to support a return to disinflation.
“In reaching its decisions, the MPC particularly noted the spillovers from the Middle East crisis, which have exerted upward pressure on energy prices, cost of transportation and other logistics.
“However, available evidence indicates that the impact of the crisis on the Nigerian economy has been largely muted due to the benefits of prior policy reforms.
“These include exchange rate stability, improvements in external reserve buffers, strengthened monetary policy transmission, well-capitalised banking system and ongoing fiscal consolidation.
The CBN governor said that the reforms had significantly improved the economy’s ability to absorb external shocks.
“As a result, the pass-through of global commodity and energy price shocks to domestic inflation has been significantly mitigated and would have been more pronounced in the absence of these reforms.
“The MPC was, therefore, convinced that the essential conditions for price stability remain firmly in place,” Cardoso said. (GP)
