Worried by expected high election spending and capital releases from the 2018 budget to be signed by President Muhammadu Buhari soon, the Central Bank of Nigeria has retained interest rate benchmark at 14 percent to mitigate the impact on inflation.
The CBN Governor, Mr Godwin Emefiele, made this known after the two-day meeting which was held by the committee in Abuja.
Mr Emefiele noted that the committee agreed to maintain status quo on the current MPR.
He added that the committee also decided to maintain the Cash Reserves Ratio (CRR) at 22.5 percent and liquidity ratio of 30.0 percent.
Also retained is the Asymmetric Window which was left at +200 and -500 basis points around the MPR.
Mr. Emefiele said “the committee considered the forecast of high liquidity injection in the second half of 2018, upward pressure of prices driven largely by substantial expansion of fiscal policy which will arise from the late passage of the 2018 budget, outstanding balance from the 2017 budget and the pre-election expenditure.”
He said the MPC reckoned that “tightening would ensure the mop up of excess liquidity, mindful that despite the moderation in inflation, the current inflation rate is still above targeted single digit and that real interest rate only turned positive in the review period.”
“The objective of the policy stance therefore would be to accelerate the reduction in the rate of inflation to single digit, to promote economic stability, boost investor confidence and promote foreign capital flows with complimentary impact on exchange rate stability.
“Conversely, the committee believes that raising the interest rate would however depress consumption and increase the cost of borrowing to the real sector. Moreover, such policy will make Deposit Money banks to reprise their assets,” Mr. Emefiele explained to journalists.