MPC retains benchmark interest rate at 14%

The Monetary Policy Meeting (MPC) of the Central Bank of Nigeria (CBN) at the end of its two days meeting on Tuesday, defiled the pressure to retain the interest rate at 14 per cent.

The MPC committee had retained the Monetary Policy Rate (MPR), otherwise known as benchmark interest rate at its last meeting in July at 14 per cent, Cash Reserve Ratios (CRR) for commercial banks at 22.5 per cent and the Liquidity Ratio (LR) at 30 per cent, Asymmetry corridor at +200 and -500 basis point.

Speaking at the end of the meeting, Governor of the CBN, Mr. Godwin Emefiele, said six of the seven members of the committee who took part in the meeting had voted to hold the main rate, while one membervoted for a cut.

It is however, worthy of note that the MPC held economic rates for the seventh consecutive period in a row.

Emefiele further explained that the committee’s decision not to cut borrowing costs, was because loosening the rate at this time would exacerbate inflationary pressures and worsen the exchange rate and inflationary rate condition.

Just recently, Nigeria emerged from recession in the second quarter of this year, when it economy expanded by 0.55 per cent year-on-year, while annual inflation slowed for a seventh month in August, easing to 16.01 per cent.

According to the survey, 74 per cent of the manufacturing companies said the business environment has been unsupportive in 2017 against 60 per cent who made the same assertion in the corresponding period of 2016.

Larger percentage of the interviewees (55 percent) believed unfavourable foreign exchange rate and bad road made the operating environment harsher for them, while 47 per cent stated that it was unavailability of fuel that worsened the business climate during this period.

Research and Advocacy, Lagos Chamber of Commerce and industry (LCCI), Dr. Vincent Nwani, Director, said that the loan portfolios of many commercial lenders declined in H1 2017, because many manufacturers and SMEs shied away from obtaining credits due to lack of access and high cost of funds in the country.

“We hope the MPC will use the National Bureau of Statistics (NBS) report which says we are out of recession and we can only grow a little as a baseline and factor it into their decision. And the only way is to moderate monetary aggregates not only Monetary Policy Rate (MPR).

“We believe it is time for the private sector to return to the banking hall to collect loans, that is the only way we will have confidence that the monetary authorities are not working at variance with other stakeholders to move the country towards economic recovery, ” he added.

The OPEC member’s economy shrank by 1.5 percent in 2016, its first annual contraction in 25 years. The recession was largely caused by low oil prices since the country relies on crude oil sales for around two-thirds of government revenue.