CBN’s MPC retains lending rate benchmark at 14% (Updated)

The Monetary Policy Committee (MPC), a creation of the Central Bank of Nigeria (CBN), after its Tuesday meeting in Abuja, announced that it has retained the monetary policy rate (otherwise known as interest rate) at 14 per cent.

 

Briefing newsmen shortly after the end of the two-day meeting, the CBN Governor, Godwin Emefiele, explained that of the 10 members of the committee that attended the meeting, nine voted to retain the rate while one voted for an increase.

 

He also said the committee also retained other monetary policy instruments, including the Cash Reserves Ratio at 22.5 per cent, Liquidity Ratio at 30 per cent and the Asymmetric Corridor at +200 and -500 basis points.

 

While MPC acknowledged the reduction in inflationary trend for the month of February 2017 as a positive development for the economy.

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Most analysts had expected the apex bank to maintain status quo. According to analysts at Afrinvest Securities, the apex bank would maintain status quo on all rates while trying to consolidate on the gains of recent improvements that have been recorded in inflation, parallel market foreign exchange rate, increase in oil production and the release of Economic Recovery and Growth Plan (ERGP) by the fiscal authority.

 

“Although both the inflation rate and foreign exchange rate have shown signs of improvement in the last few weeks, a change in monetary policy might be too soon. We believe more time is required before a monetary policy change can be effective under the current situation,” FSDH Merchant Bank Limited stated in a prognosis for status quo.

 

“The implication on the markets, should the MPC maintain status quo, is expected to be neutral given that most foreign investors are staying on the side-line at the moment against the backdrop of an inefficient foreign exchange market.

 

“Currently, the equities market remains quiet and driven only by short term speculative trading and fundamentally attractive earnings release. In the fixed income market, we expect investor appetite to remain tilted towards shorter term government securities given the high yield offering which tends to off-set current inflation risk and also inflation expectation,” Afrinvest Securities stated.

 

 

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