The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has unanimously voted to retain the Monetary Policy Rate (MPR) at 27.50%.
The MPC is saddled with the responsibility of setting policy interest rate, which is a key tool for managing inflation and maintaining economic stability.
Briefing journalists shortly after the 300th meeting of the Committee on Tuesday in Abuja, the CBN Governor, Mr. Olayemi Cardoso, announced that the Committee also voted to retain the Cash Reserve Ratio (CRR) at 50% for Deposit Money Banks and 16% for Merchant Banks, and retain the Liquidity Ratio (LR) at 30% and the Asymmetric Corridor at +500/-100 basis points around the MPR.
On why the Committee took the decisions, Mr. Cardoso said, “the MPC noted the relative improvements in some key macroeconomic indicators which are expected to support the overall moderation in prices in the near to medium term.
“These include the progressive narrowing of the gap between the Nigeria Foreign Exchange Market (NFEM) and Bureau De Change (BDC) windows, the positive balance of payments position, and easing price of PMS.”
He said the members also noted with satisfaction the progressive moderation in food inflation and, therefore, commended the government for implementing measures to increase food supply as well as stepping up the fight against insecurity, especially in farming communities.
The Committee, thus, encouraged security agencies to sustain the momentum while government provides necessary inputs to farmers to further boost food production.
The Committee, according to the apex bank governor, however, acknowledged underlying inflationary pressures driven largely by high electricity prices, persistent foreign exchange demand pressure and other legacy structural factors.
It noted new policies introduced by the Federal Government to boost local production, reduce foreign currency demand pressure, and thus, lessen the pass-through to domestic prices.
He said given the relative stability observed in the foreign exchange market, members urged the Bank to sustain the implementation of the ongoing reforms to further boost market confidence.
He said the Committee also called on the fiscal authority to strengthen current efforts at enhancing foreign exchange earnings, especially from gas, oil and non-oil exports.
Cardoso said the MPC, however, expressed concerns about the recent decline in crude oil prices, attributable to increased production by non-OPEC members as well as uncertainties associated with U.S. trade policy, which present new challenges for fiscal receipts and budget implementation.
He said the Committee reaffirmed the continued stability of the banking system following notable improvements in key performance indicators and observed the appreciable progress in the ongoing recapitalization exercise.
He said the members, thus, called on the Bank to sustain its effective oversight of the industry to ensure compliance with regulatory and macroprudential guidelines.
“On the strength of these considerations, and driven by the continued uncertain policy environment, exacerbated by ongoing global shocks, members weighed the available policy options and were unanimous in their decision to hold policy to enable a better understanding of near-term developments,” he explained.
