Nigeria's central bank continues to hold interest rate at 14%, the highest in 10 years

The Central Bank governor said the committee reached the decision on the consideration to await more clarity on economic activities.

  • Godwin Emefiele, CBN Governor said the MPC committee decided to key the lending rate on the consideration to await more clarity on economic activities.
  • The monetary policy committee has been holding the key rates since July 2016, after increasing it to support the troubled Naira and curb inflation at as that time.
  • Nigeria's annual inflation rate declined to 12.48% in April 2018 way below the interest rate.

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The monetary policy committee retained interest rate (monetary policy rate) which was at 14%, Cash Reserves Ratio at 22.5%, Liquidity Ratio which was left at 30%; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.

The monetary policy committee has been holding the key rates since July 2016, after increasing it to support the troubled Naira and curb inflation at as that time.

Godwin Emefiele, CBN Governor announced the decision of the committee at the end of a two-day meeting held in Abuja, the bank’s headquarters, on Tuesday, May 22, 2018.

Emefiele said the committee reached the decision on the consideration to await more clarity on economic activities.

Gaimin Nonyane, Head, Economic Research, Ecobank London, told Channels Television that expectation on the key rates  should be in Q3 of then year.

“We expect the central bank to reduce the interest rate by Q3 and Q4,” she said during a Skype call on Tuesday afternoon.

Nonyane said the key rates are currently in the positive territory and some still in the negative territory, so by the Q3 moderation should have set in.

Dr Abiodun Adedipe, Economist and Partner, B. Adedipe and Associates said there is a whole of balancing that has to handle in the third quarter because of election spendings.

Ayodeji Ebo, Afrinvest Securities Limited, said: “it is in line with projection, we don't expect any changes at the moment.”

At its first meeting in last month, nine members of monetary committee, including the newly confirmed ones, unanimously agreed to maintain the current monetary policy stance.

The committee had believed that further tightening would strengthen the impact of monetary policy on inflation with complementary positive effect on capital flows and exchange rate stability.

The monetary policy committee decision is coming at a time the country’s annual inflation rate declined to 12.48% in April 2018 way below the interest rate.

The April headline figure represents 0.86 percent points less than the rate recorded in March 2018, which was 13.34%.

Analysts look ahead for the next MPC meeting in July 2018 when inflation figures of May, June would have come in and expected to drop to single digit.

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