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Unlike Egypt, South Africa, CBN keeps Nigeria’s interest rate constant despite pressure

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ECONOMY: The road ahead is rough, really rough, Emefiele tells Senate

The Central Bank of Nigeria (CBN) has resisted pressure to raise interest rates despite the fact that most of its peers in Africa have initiated moves to push up rates in response to economic pressures induced by the ongoing Russia-Ukraine conflict.

The bank’s Monetary Policy Committee (MPC) on Monday voted to hold all monetary parameters constant, keeping the benchmark interest at 11.5 percent despite growing inflationary pressure that threatens to create a debt crisis in the country.

The committee retained the Assymetric Corridor of +100 -700 basis points around the MPR while the Cash Reserve Ratio (CRR) and Liquidity Ratio remained at 27.5 percent and 30 per cent respectively.

The apex bank had also retained the interest rate at 11.5 percent in January.

Egypt, South Africa, Ghana have all increased their interest rates to match up with the United States, the first since 2018 due to the uncertainty caused by the Russia and Ukraine conflict.

Ghana’s central bank announced its biggest ever interest rate at 17 percent, a 250 basis points while Egypt’s interest rate jumped by 100 basis points to 10.25 percent.

Similarly, South Africa’s central bank lifted its benchmark interest by 25 basis points to 4 percent in January and analysts are expecting one of the biggest increases in the coming days when the new rate will be announced.

READ ALSO: CBN retains 5% interest rate on intervention loans

The CBN Governor, Mr. Godwin Emefiele, disclosed this in a communique issued at the end of the MPC meeting in Abuja.

He said the 10 members of the MPC at the meeting were divided on policy decisions.

Emefiele said: “Three members voted to raise MPR by 25 basis points, one member voted to raise it by 50 basis points while six members voted to hold all parameters constant.

“The MPC feels increasing the rates during inflation could adversely impact on economic recovery and stifle expected investment expansion.

“Tightening would reverse the steady improvement recorded in credit expansion, and it will not necessarily tame inflation.

“On the other hand, loosening will trigger further liquidity challenge and also trigger foreign exchange demand pressure as the excess liquidity would exert demand pressure on the foreign exchange market.”

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