Nigeria’s current macroeconomic environment sufficient for disinflation – Cardoso

The Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso, says Nigeria’s macroeconomic fundamentals remain resilient enough to support a gradual return to lower inflation.

Cardoso stated this on Wednesday in Abuja while presenting the communiqué from the 305th meeting of the Monetary Policy Committee (MPC).

The News Agency of Nigeria (NAN) reports that the MPC retained the Monetary Policy Rate (MPR) at 26.5 per cent and left all other monetary parameters unchanged.

The committee also retained the asymmetric corridor around the MPR at +500/-100 basis points.

Similarly, the Cash Reserve Ratio (CRR) was retained at 50 per cent for Deposit Money Banks and 16 per cent for Merchant Banks, while the Liquidity Ratio remained at 30 per cent.

Cardoso said that the decisions of the MPC were anchored on a comprehensive assessment of risks to the outlook.

According to him, although inflation has risen marginally for two consecutive months, largely induced by external shocks, the MPC recognised its transitory nature.

He said that the committee remained confident that the current macroeconomic environment was sufficiently robust to support a return to disinflation.

“In reaching its decisions, the MPC particularly noted the spillovers from the Middle East crisis, which have exerted upward pressure on energy prices, cost of transportation and other logistics.

“However, available evidence indicates that the impact of the crisis on the Nigerian economy has been largely muted due to the benefits of prior policy reforms.

“These include exchange rate stability, improvements in external reserve buffers, strengthened monetary policy transmission, well-capitalised banking system and ongoing fiscal consolidation.

The CBN governor said that the reforms had significantly improved the economy’s ability to absorb external shocks.

“As a result, the pass-through of global commodity and energy price shocks to domestic inflation has been significantly mitigated and would have been more pronounced in the absence of these reforms.

“The MPC was, therefore, convinced that the essential conditions for price stability remain firmly in place,” Cardoso said.