CBN Policy Committee Keeps Benchmark Interest Rate
Central Bank of Nigeria (CBN) monetary policy committee keeps benchmark interest rate at 11.5% after the meeting noted a relatively healthy gross domestic products growth posted in the third quarter of 2021.
The monetary authority keeps the monetary policy rate 11.5% with an asymmetric corridor around the policy rate at +100/-700 basis points, cash reserve ratio at 27.5% and liquidity ratio at 30.0%.
The decision to maintain the status quo on key policy rates at the last policy meeting committee this year aligned with some investment banking firms’ expectations.
In taking the decision, the monetary authority also considered a recent improvement in headline purchasing manager index readings in the months within the third quarter.
In addition, the committee noted the moderate but steady decline in prices as inflation declined for the seventh consecutive month. The in-house CBN forecast point towards a continued downward trend.
However, the MPC noted that security challenges across the country remained a major source of concern. They reiterate the call to the FGN to prioritise investment in public infrastructures such as improved transportation networks, power supply, and telecommunications facilities.
The committee explains that funding for such projects has a multiplier effect on other sectors of the economy and could be sourced through equitable partnerships with foreign investors and Nigerians in the diaspora.
In appraising the financial markets, the committee observed the positive performance of the equities market within the review period and commended the sustained investor confidence in Nigeria’s economy.
MPC said capital adequacy ratio and liquidity ratio both remained above the prudential limits in the banking system. It noted that the non-performing loan ratio reflects progressive improvement compared to the corresponding period in 2020.
However, the MPC urged banks to sustain their tight prudential regime to bring NPLs below the 5% regulatory benchmark. The MPC noted that tightening the rates could increase the cost of funds and constrain output growth.
On the other hand, loosening could further widen the real interest rate gap and compound the price distortions in the money market which could exacerbate inflationary pressures.
However, the MPC believes that holding would encourage continued permeation of policy measures in supporting recorded growth and macroeconomic stability as well as allow the committee to carefully appraise the unfolding global developments around tapering and normalisation by advanced economies.
#CBN Policy Committee Keeps Benchmark Interest Rate – Read Also: Monetary Policy Committee cuts benchmark interest rate to 12.5%
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