By Uche Usim (Abuja) and Chinwendu Obienyi
The Monetary Policy Committee of the Central Bank of Nigeria (CBN), on Tuesday, expressed concerns over Nigeria’s fiscal headroom, which it said has remained constrained and fragile, following the shocks of the COVID-19 pandemic, crude oil price volatility and the continued build-up of public debt, which hit N32.9 trillion by December 31, 2020.
This was as the bank retained its benchmark interest rate, the Monetary Policy Rate (MPR), at 11.5 percent after a two-day Monetary Policy Committee (MPC) meeting in Abuja, citing inflation concerns.
The CBN Governor, Godwin Emefiele, while announcing the committee’s decision added that it also retained the liquidity ratio at 30 per cent and cash reserve ratio (CRR) at 27.5 per cent.
According to Emefiele, six members voted to maintain all parameters while three voted to increase the MPR. The Monetary Policy Rate (MPR) is the anchor interest rate in an economy, used for setting other commercial interest rates within the economy. This however did not come as a surprise to most analysts in the financial services sector who had predicted a “HOLD” decision based on a recent Q4 2020 numbers with real GDP growth growing marginally by 0.11 per cent year-on-year (y/y) as against -3.62 per cent recorded in Q3 2020.
For instance, Cordros Research, had last week said it expected the Committee members to vote for a “HOLD” decision, adding that most members believe that the MPC still needs to maintain its accommodative monetary stance, amidst rising inflationary pressures, to enable economic growth and gain more foothold.
Speaking after announcing the committee’s decision, Emefiele said the apex bank was not looking to make life difficult for Nigerians and businesses operating in the country by increasing the key interest rate, stressing that increasing the MPR will increase the cost of borrowing and reduce access to credit for businesses which he said might reverse the growth trend of the economy.