FREE

NIGERIA MONETARY POLICY COMMITTEE - MPC takes a policy breather, maintains MPR at 11.5%

By a unanimous vote, the Monetary Policy Committee (MPC) stood pat on its previous policy decisions at its final meeting for the year. Previous decisions by the MPC in 2020 include cutting the Monetary Policy Rate (MPR) by 200bps, raising the Cash Reserve Ratio (CRR) by 500bps and adjusting the asymmetric corridor around the MPR to +1%/-7%, from +2%/-5% to induce lending to the real sector.

CBN seeks to stimulate recovery amid structural headwinds The outcome of the meeting shows the Committee’s unrelenting commitment to its growth objective, over its inflation and exchange rate objectives. Noting that a rate hike could stifle economic recovery, the MPC stated that a rate cut could also mount demand-push inflationary pressures on consumer prices. Therefore, the HOLD decision was taken to allow recent policy measures to permeate the economy, while observing the trend of developments in global and domestic spheres. The bank however committed to the continued implementation of its pro-lending policies, that have since boosted aggregate credit by ₦3.97 trillion between May 2019 and November 2020.

Current stance sufficient to drive economic recovery The prevailing message out of yesterday’s meeting is that the MPC could remain on hold, barring any material downside surprises to economic growth. The CBN Governor expressed cautious optimism about the recession bottoming out in Q4’20 and expects a firm return to the growth path in Q1’21, citing the recent upturn in PMI readings as a pointer to near-term recovery.