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CBn Emefiele

6 against 1 vote at MPC meeting leaves all rates unchanged

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The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) ended its two-day meeting in Abuja on Tuesday, retaining all exiting rates in line with several analysts’ predictions.

In his remarks at the end of the meeting, the chairman of the MPC and Governor of the CBN, Mr. Godwin Emefiele, made it clear that after understudying happenstances in the economy, “The committee decided by a vote of six to one, to retain the monetary policy rate (MPR) at 14% alongside all other policy parameters”.

“In arriving at this whole decision, the MPC commited to employing maximum flexibility to guide the economy on the path of optimal growth. Consequently, six members voted to retain MPR and all other parameters at their current levels while one member voted to lower the MPR to signal an ease to the current stands of tight monetary policy.

“However overall, majority of the members expressed a strong commitment to policy flexibility that will allow the community to promptly take the necessary action that will promote overall macro-economic stability and engender sustainable growth.

“Consequently, the MPC voted to; 1. Retain the MPR at 14% 2. Retain the CRR at 22.5% 3. Retain liquidity ratio at 30% and 4.retain the asymmetric corridor at + 200 and -500 bases point around the MPR,” Emefiele averred.

Several pundits had even before the resumption of the meeting on Monday, argued that CBN cannot raise the Monetary Policy Rate (MPR) now because we just got out of recession.

They noted that if it begins to toy with the rate, the economy stands the risk of facing a bit of volatility around inflation. And if inflation goes up, the economy will go down again. That may be reverting into recession.

Observers are upbeat that what we have (that took us out of recession) is weak growth of 0.55 per cent. But if MPC reduces MPR, that will have impact on inflation rate. That means that the economy would slow down. Inflation is still at 16.01 per cent, meaning that it is still high by any standard.

Besides, FSDH Merchant Bank Ltd., made it clear on Friday that “the MPC may hold rates to maintain stable domestic prices compatible with economic growth objectives, while the government implements fiscal measures to sustain growth. Fiscal measures in the form of tax relief and tariff adjustment are required to boost economic activities.”

Business Hilights recalls that the MPC at its July meeting retained the MPR at 14 per cent; CRR at 22.5 per cent and Liquidity Ratio at 30 per cent; and retained the Asymmetric Corridor at +200 and -500 basis points around the MPR. The MPC reiterated its call on the bank to sustain its intensive surveillance of deposit money banks’ (DMBs’) activities for the purpose of promptly identifying and addressing vulnerabilities.


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