Nigeria Holds Key Rate At 14%


The Central Bank of Nigeria held its benchmark interest rate unchanged at 14 percent at its May 2017 meeting as inflationary pressures start to ease while the economy remained in recession for the fifth quarter in the first three months of 2017. The decision came in line with market expectations.

Excerpts from the Statement by the Central Bank of Nigeria:

Available data and forecasts of key economic variables as well as the newly released Federal Government?s Economic Recovery and Growth Plan (ERGP), indicate prospects of output recovery in 2017. The Committee expects that the implementation of this plan, the new foreign exchange policy as well as the current effort by the Federal Government to restore peace in the Niger Delta region would help revive economic growth and stabilize prices. The Committee identified the downside risks to this outlook to include the possibility of a slower-than-expected rate of global economic activity, tight monetary policy stance by the U.S. Fed, resulting in strengthening U.S dollar, and low oil prices.

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. 

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 | Joana Taborda | joana.taborda@tradingeconomics.com
5/23/2017 2:45:20 PM