The Monetary Policy Committee, MPC of the Central Bank of Nigeria, CBN has increased the Monetary Policy Rate, MPR to 18 per cent from 17.5 per cent.
The Governor of the Bank, Mr Godwin Emefiele disclosed this while presenting the communique of the meeting to Journalists in Abuja.
He said that the Committee’s debate at the meeting, was whether to continue its rate hike to further dampen the rising inflation trajectory or hold to observe emerging development and allow for the impact of the last five rate hikes to permeate the economy.
“Loosening, in the view of members, would gravely undermine the gains achieved so far,” he said.
The MPC observed the continued upward risk to price development around expectations on the removal of the PMS subsidy; rising prices of other energy sources; continuing exchange rate pressure; and uncertain climatic conditions. These in the view of members, provides a compelling argument for an upward adjustment of the policy rate, albeit, less aggressively.
The Committee, however, noted that the naira redesign and cash withdrawal limit policies have resulted in a sizeable reduction in Currency-Outside-Banks, indicating an expected improvement in the potency of monetary policy tools.
Members, however, remained aware of the ongoing challenges associated with the limits imposed on cash withdrawals in the face of frequent downtime in bank electronic transaction channels.
The Committee thus called on Other Depository Corporations, online payment platforms, and other stakeholders to ensure that the prevailing incidence of network failures is overcome in the immediate and short term.
This would ensure that the Naira Redesign and Cash Withdrawal Limit Policies lead to an improved in-road of the CBN Cashless program and efficiency of the transmission mechanism of monetary policy.
“Members, thus, resolved by a majority vote to raise the Monetary Policy Rate, MPR by 50 basis points.
In Summary, ten (10) members voted to raise the MPR by 50 basis points, one (1) member voted to raise the MPR by 25 basis points and one (1) member voted to hold the MPR. All members voted to keep all other parameters constant.
The MPC, therefore, voted to: Raise the MPR by 50 basis points to 18.0 per cent; Retain the asymmetric corridor of +100/-700 basis points around the MPR; Retain the CRR at 32.5 per cent; and Retain the Liquidity Ratio at 30 per cent.
Confidence Okwuchi
