By Etuka Sunday
The Central Bank of Nigeria (CBN) yesterday at its first Monetary Policy Committee (MPC) meeting of 2018 decided to retain interest rate at 14% for eight consecutive times.
The decision was contrary to the expectation of some analysts and business owners who predicted monetary policy easing since the economy is a bit stable.
However, rising from reconstituted MPC meeting in Abuja, the CBN’s Governor, Mr Godwin Emefiele announced that the members voted unanimously to retain MPR at 14%, CRR at 22.5%, Liquidity Ratio at 30. 0% and Asymmetric Corridor at +200 and -500 basis points around the MPR.
He said, the decision to retain the MPR rate at 14% has nothing to do with the new MPC members unilaterally voting to hold because they inexperience, but that the policies unchange was unanimously decided by nine MPC members after exhaustive review of economic of both outlook and side risks.
On the outlook trajectory, Emefiele said that the members of MPC took significant note of progress recorded by economy which he said was spurred by implementation of Economic Recovery and Growth Plan ( EGRP).
According to the CBN governor, the Committee was of the view that further tightening would strengthen the impact of monetary policy on inflation with complementary positive effects on capital flows and exchange rate stability.
“Nevertheless, it could potentially dampen the positive outlook for growth and financial stability.
However, the Committee is of the view that loosening would strengthen the outlook for growth by stimulating domestic aggregate demand through reduced cost of borrowing.
This may, however, lead to a rise in consumer prices, generating exchange rate pressures on the currency in the process.
The Committee also believes that loosening could worsen the current account balance through increased importation.
On the argument to hold, the Committee believes that key macroeconomic variables have continued to evolve in a positive direction in line with the current stance of macroeconomic policy and should be allowed more time to fully manifest,” Emefiele further explained.
The CBN governor advised that quick passage of 2018 budget by National Assembly will not only accelerate economy recovery pace but deepen investors confidence.
He said that MPC members advised federal government to restrain from domestic borrowing in order to free credit lines for private sector to borrow.
