The Central Bank of Nigeria (CBN) may consider raising its key lending rate for the first time in two years if the inflation rate fails to slow in July, a deputy governor of the bank, Joseph Nnanna has said.
Nigeria’s inflation rate had dropped in June for the 17th consecutive time, recording its lowest drop in five months from 11.61 percent year-on-year (YoY) in May 2018 to 11.23 percent YoY in June 2018.
Nnanna, while speaking with Bloomberg on Monday, said the apex bank was “in the mood” for tightening.
Last month, the Monetary Policy Committee (MPC) of the CBN had retained the Monetary Policy Rate (MPR) at record-high of 14 percent for the 11th consecutive time since 2016 to monitor the magnitude of the liquidity impact of the fiscal injection and election related expenditure.
CBN Governor, Godwin Emefiele, had said seven out of the ten members of the committee that attended the meeting agreed to maintain the monetary policy stance, adding that two members voted to increase the MPR by 50 basis points, while the other one member voted to raise the interest rate by 25 basis points.
“Every member of the Monetary Policy Committee is certain that the monetary policy rate should increase if inflationary pressures build up,” Nnanna said.
“Our intention is to ensure that the interest rate is kept positive in real terms.
“These factors would warrant a rate increase to send the right signal to the public, that the central bank will tighten policy to respond to higher inflation.
“There’s a scope to raise rates before the elections in February. The central bank is still in the mood for tightening,” he said.
“How fast are we going to tighten is what members haven’t agreed upon.
“I am not worried about reversal of capital flows. If any investor wants to exit the market, we shall meet them at the door and write a check and give them their money,” he added.
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