Nigeria Leaves Monetary Policy Unchanged


The Central Bank of Nigeria held its benchmark interest rate unchanged at 14 percent at its March 2017 meeting, as expected. The inflation rate eased slightly for the first time in fifteen months to 17.78 percent in February, but remained well above the central bank target of 10 percent by 2020. Also, the economy shrank 1.5 percent in 2016, the first annual contraction in 25 years.

Excerpts from the Statement by the Central Bank of Nigeria:

The Committee re-evaluated the implications for Nigeria of the continuing global uncertainties as reflected in the unfolding protectionist posture of the United States and some European countries; sustenance of the OPEC-Russian agreement to cut oil production beyond July 2017; sluggish global recovery and the strengthening U.S. dollar.

The Committee also evaluated other challenges confronting the domestic economy and the opportunities for achieving price stability, conducive to growth in 2017. In particular, the Committee noted the persisting inflationary pressures; continuing output contraction; high unemployment rate; elevated demand pressure in the foreign exchange market; low credit to the real sector and weakening financial system indicators, amongst others.

Nonetheless, members welcomed the improved implementation of the foreign exchange policy that resulted in naira’s recent appreciation. Similarly, the Committee expressed satisfaction on the release of the Economic Recovery and Growth Plan, and urged its speedy implementation with clear timelines and deliverables. On the strength of these developments, the Committee felt inclined to maintain a hold on all policy parameters.

Besides, the Committee noted the need to create binding restrictions on growth in narrow money and structural liquidity and the imperative of macroeconomic stability to achieving price stability conducive to growth.

The Committee noted the consecutive positive contribution of agriculture to GDP in Q4 2016, a development partly traceable to the Bank’s interventions in the sector. The Committee remains optimistic that, if properly implemented, the newly released Economic Recovery and Growth Plan (ERGP) coupled with innovative, growth-stimulating sectoral policies would help fast track economic recovery.

In summary, the MPC decided to:

(i)  Retain the MPR at 14 per cent;
(ii) Retain the CRR at 22.5 per cent;
(iii) Retain the Liquidity Ratio at 30.00 per cent;
(iv) Retain the Asymmetric corridor at +200 and -500 basis points around the MPR.

Central Bank of Nigeria | Deborah Neves | deborah.neves@tradingeconomics.com
3/21/2017 5:19:42 PM