12% Benchmark Interest Rate Retained by CBN

On Tuesday, May 20, the Central bank of Nigeria concluded to leave the Monetary Policy Rate (MPR), also known as the benchmark interest rate at 12% with a corridor of +/-200 basis points.

Also left unchanged by the CBN was the Cash Reserve Requirement (CRR) for both public sector deposits at 75% as well as that of the private sector deposits at 15%.

The acting CBN Governor, Dr. Sarah Alade, on the last day of the Monetary Policy Committee (MPC) meeting, said that the decision of the committee to retain rates at their current level was unanimous, revealing that only one member voted for an asymmetric corridor around the MPR.

Dr. Sarah also reported that the external reserve of the country which is currently at $38.30bn could maintain about nine months of imports cover.

Alade also said that in the last sixteen months, the inflation rate had largely been contained within the targeted range within the six digits. She added that the stable inflation rate as well as stability in the foreign exchange market, stability in interbank rate and strong growth outlook has brought about a stable overall domestic economic environment.

However, she said that the existing stability is threatened by high systemic banking system liquidity, elevated security concerns and the anticipated high election-related spending in the run-up to the 2015 general elections.

She added that since January 2014, core inflation has continued to send conflicting signals noting that the upward trends of prices could be greatly influenced if the upward trend continues as observed in April.

‘’We have observed stability in the foreign exchange market and the money market has also remained stable. We can also see what is happening in the capital market. So all round, I think we have achieved stability which the committee is very pleased about.

‘’At this time of the year, generally it is to be expected that when companies are paying dividends, that there is going to be repatriation of dividend.

‘’We also talked about the impact of Quantitative Easing (QE) we had expected that there will be some capital outflow. We have also witnessed a little bit of uncertainty during February and March when investors were not just sure of what was happening.

‘’But I think we have gone beyond that now, we are beginning to see inflow-investors’ confidence has returned and now the outflow is less than the inflow we normally see’’ said the acting governor.