CBN retains Monetary Policy Rate at 11.5%


The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has unanimously voted to retain the Monetary Policy Rate (MPR) at 11.5 percent.


At its 281st meeting, which lasted from16-17 September, 2021, the MPC weighed the pros and cons of tightening, holding or loosening the stance of policy, noting the impact on output growth, price development, unemployment and exchange rate.


“Members of the Committee felt that tightening will contract the current level of system liquidity, and thus reduce demand pressure in the foreign exchange market, given that the current MPR at 11.5 percent, CRR at 27.5 percent and liquidity ratio at 30.0 percent is already a tightening stance.


“This will, however, raise the cost of credit and reduce the volume of credit to the private sector. On loosening, the Committee felt that this would lower retail interest rates and improve the ability of obligors to repay their obligations, with a complementary reduction in NPLs,”  the CBN Communique read.


The gradual downward movement of inflation may, however, be compromised if policy accommodation is increased, leading to a further widening of the negative real interest rate and thus exacerbating capital outflows as investment in Naira denominated assets become less attractive.


Members considered that a hold stance would allow the current recovery of output growth and decline in inflation to continue smoothly, thus gradually moving the economy to a sustainable path before adjustments are made to the stance of policy.


“Based on the above considerations, the MPC made the decision to hold all policy parameters constant; believing that a hold stance will enable the continued permeation of current policy measures in supporting the recorded growth recovery and macro-economic stability,” the Communique further read.


In summary, the MPC voted to:

Retain the MPR at 11.5 percent;

Retain the Asymmetric Corridor of +100/-700 basis points around the MPR;

Retain the CRR at 27.5 percent;

Retain the Liquidity Ratio at 30 percent.


Amaka E. Nliam/CBN

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