By Tony Obiechina, Abuja
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) at its 270th meeting on Tuesday, retained the Banking Rate otherwise known as (MPR) at 13.5 per cent.
CBN Governor, Mr Godwin Emefiele, who announced the decision of the committee while briefing journalists at the end of its two-day meeting held at the apex bank’s headquarters in Abuja, said the upward movement in inflation was expected.
Nigeria’s annual inflationrateincreased to 11.61 percent in October 2019 from 11.24 percent in the previous month, reaching the highest since May of 2018.
The Governor explained that the decision to retain the MRR was taken to protect prices, adding that the cash reserve ratio (CRR) will also be retained at 22.5%, liquidity ratio at 30% and asymmetric corridor at +200 -500 basis point.
He said, “The committee noted the uptick in headline inflation year-on-year from 11.24% in September to 11.61% in October 2019”.
“This was anticipated as part of the seasonal end of the year uptick in prices but was further accentuated by the border closure and expected temporary food supply shock which will adjust over the medium to long-term as the economy increases investments in food production”.
Defending the committee’s decision, Emefiele said: “While tightening may encourage capital flows, it also has the downside consequence of stifling the already fragile recovery in output growth.
“The committee also noted that a reduction in the policy rate will improve growth prospects but in view of the uptick inflationary pressures, it decided that the balance of risk was in favour of protecting prices, interest rates, growth in domestic credit amongst other positive developments.
“Committee felt that there would be more gains in the short to medium term in holding policy at its current position. In its consideration to hold, the monetary policy noted with pleasure the positive outcomes of actions already taken by the Bank”.
According to him, the CBN projects that the country’s economy driven by the non-oil sector, will grow by 2.38% in the fourth quarter of 2019.