The monetary policy rate (MPR) is the baseline interest rate in an economy; all other interest rates are based on the MPR.
CBN Governor, Mr. Godwin Emefiele, said following the committee’s first meeting of the year at the CBN headquarters in Abuja, that the committee members unanimously retained key rates.
According to him, the committee voted to keep the key lending rate at 11.5 percent, with an asymmetric corridor of +100 and -700 basis points around the MPR and a liquidity ratio of 30 percent.
“The MPC believes that a hold will signal its recognition of the fragility of the growth recovery, as well as its sensitivity to emerging global and domestic uncertainties.” As a result, there is a need to maintain the current policy trajectory,” Emefiele explained.
“After carefully weighing the benefits and drawbacks of each policy ratio, the MPC decided to maintain all policy parameters constant.”
He stated that the committee believed that the current monetary policy stance has aided the growth recovery and that it should be allowed to continue for a little longer in order to accomplish the MPC objective of price stability conducive to sustained growth.
The committee reasoned this would also allow it to carefully assess the consequences of the unfolding global development surrounding policy tapering and normalization by advanced countries.
They found that inflation remained high in the majority of developed and emerging nations, owing to ongoing exchange rate swings and supply bottlenecks.
According to Emefiele, members believe that inflation will drop further in the coming year, owing to considerable interventions in the agriculture sector.
The CBN MPC stated that the Nigerian economy is likely to continue growing well, building on the remarkable growth reported in the third quarter of 2021, which reflects the country’s ongoing recovery from the recession.
The MPR, which has been unaltered for months, is a significant weapon for controlling interest rates in the economy.
Lowering the interest rate could have encouraged additional borrowing, whilst hiking the interest rate could have signaled the CBN’s desire to limit the economy’s money supply.