Monetary policy decision: FG retains MPR at 11.5%, maintains other parameters

…Decision will yield economic growth —Adi Bongo

…Retaining previous MPR expected —Prof. Uwaleke

By Abimbola Abatta, Blessing Wika and Uthman Salami

The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said the Monetary Policy Committee (MPC) has retained the previous benchmark interest rate (MPR) at 11.5%.

Emefiele, who disclosed this at the end of the 282nd MPC meeting yesterday, 23rd November 2021, also revealed that all other monetary parameters are constant.

The governor noted the continued moderation in the headline inflation, which he attributed to a marginal decline in the food and core components of the inflation index in October 2021.

“Other decisions of the Committee decision include the asymmetric corridor of +100/-700 basis points around the MPR was retained. CRR was retained at 27.5% while liquidity ratio was also kept at 30%,” the CBN governor had said.

According to the MPC, the overall outlook of the Nigerian economy indicates a continuous rebound in economic growth, which is supported by monetary and fiscal policies and stability in the price of crude oil.

The MPC equally stated that its policy over the previous months has begun to show results, owing to the 4.03% growth in real GDP and the 6th consecutive monthly decline in headline inflation.

The committee also noted the impact of increased vaccination in the effort to ensure economic growth in the country. In the same vein, the governor expects Inflation to continue to ease towards the end of the year.

Meanwhile, analyst Adi Bongo, in his remarks on the implication of the MPC’s decision on the Nigerian economy, said it will boost the economy.

Bongo also noted that the retained Monetary Policy Rate (MPR) has diffused the anticipation of a surge in inflation as well as any sort of reversal in economy activities.

In his words, “The MPC kept the rate as it is, and what that means is that the anticipation of inflation is somehow tempered. We are not expecting any surge in inflation going forward. That is why they are confident to keep it at that level. Of course, inflation has to do with interest rate. The implication is that we don’t expect any sort of reversal or change in the economy.

“Liquidity is another thing. This is a kind of government that is trying to observe how things will turn as we are drawing to the festive season, which is Christmas where we have a volume of economic activities and financial flow, increase in the movement of people as well as volume of goods and services. What that portends usually is that goods purchase receives a boost during this period.

“Retaining the key parameters at the previous levels mean that the government is already poised to control this influx that is anticipated during December. It doesn’t change anything with the interest level because it remains what it is. It doesn’t therefore impact on lending because I think lending and credit behaviour respond to different other impetus from the economy, especially the assessment of perceived risks in doing business.

“We have seen that  Economic Activities are  beginning to pick up. The purchasing manager index is above 50 the last time I checked, meaning there is that optimistic expectation regarding inventory traffic to and fro factories. We will continue to experience increased economic activities which will lead to increased economic growth in going into the quarter fall.

“We’ve got the report of the third quarter. And we don’t expect to receive any more data until much later into 2022 when we get the result of the quarter fall for 2021. But from indications, we can observe the increase in the level of activities system. We can tell that the economy will experience a new ease of life. But for now, everything is still as they were. The government is anticipating the inflationary boost that comes from this huge traffic in volume. So, they are ready to curtail it so that it won’t shoot out of range.”

Also speaking, Prof Uche Uwaleke, a professor of Capital Market, said retaining the previous MPR was the right decision when the prevailing circumstances are considered.

The Professor said, “It was expected. That was the right decision in view of the prevailing circumstances. The twin challenge of fragile economic growth and high inflation rate makes further tightening or loosening of monetary policy undesirable.

“Since the rates were not changed, no significant change in the lending rates of banks is expected.”

On the part of Mr Eze Igwe, an Economist and Businessman, the Monetary Policy Rate (MPR) was retained at 11.5% to continue to encourage bank lending to the real sector.

However, Mr Igwe noted that “this measure has not yielded the desired result with inflation rates at 17% in October 2021. This means that the yield from such lending will not cover the cost of capital. However, MPR at 11.5% has still not lowered the onward lending rate of commercial banks as loans are still priced at over 25%.”