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  • How MPC members agreed to retain existing rates

    How MPC members agreed to retain existing rates

    Members of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) have shared their thoughts on the state of the economy, pointing to a steady seven-month drop in the cost of living.

    In their recent personal reports, the experts discussed how they plan to move from strictly raising interest rates to a more careful approach that supports local businesses while keeping the Naira stable.

    The main focus of the meeting was the fact that inflation—the rate at which prices rise—fell to 16.05 percent in October 2025. One member, Aku Pauline Odinkemelu, noted that this downward trend is now “entrenched and broad-based.”

    She suggested that because things are improving, it is safe to slightly reduce the main interest rate. This, she argued, would give a “measured stimulus” to help farmers and factory owners grow their businesses without causing prices to jump back up.

    Read Also: MPC retains key rates as Cardoso projects continued disinflation

    However, not everyone agreed that it was time to relax. CBN Governor Olayemi Cardoso and Deputy Governor Emem Usoro voted to keep interest rates exactly where they are at 27 percent. They pointed out that there are still “heightened risks” on the horizon.

    Governor Cardoso explained that as Nigeria moves toward the 2026 budget and the 2027 elections, the government often spends more money, which can lead to higher prices. He said keeping the rate high is a “clear signal of reinforcing stability” to make sure the progress made so far is not lost.

    One big change all members agreed on was a new rule for how banks keep their money with the CBN. They adjusted a specific “corridor” to make it less attractive for banks to just leave their cash sitting idle at the Central Bank.

    Instead, the goal is to push banks to lend that money to everyday Nigerians and businesses. Murtala Sabo Sagagi stated that this move helps “tighten liquidity” while encouraging banks to manage their cash more effectively.

    The reports also showed good news for Nigeria’s savings. Deputy Governor Bala Mohammed Bello reported that the country’s foreign reserves grew to $46.70 billion in November 2025. He added that Nigeria’s removal from a global “grey list” for financial monitoring has “further enhanced Nigeria’s competitiveness globally,” making the country more attractive to international investors.

    Even with these wins, some members warned that the job is not yet finished. Aloysius Uche Ordu cautioned that fixing the economy is a “marathon, not a sprint.” He reminded everyone that other countries that celebrated victory over high prices too early often saw the problems come back even worse.

    Finally, the committee members asked the government to help out with things the CBN cannot control, such as improving security for farmers and lowering the high cost of electricity and transport.

    Philip Ikeazor noted that while the exchange rate is steady, prices in the cities are still a concern. He called for the government to fix these “structural impediments” to help the economy grow for everyone.

  • MPC holds rates as inflation decelerates for third consecutive month

    MPC holds rates as inflation decelerates for third consecutive month

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria has voted to retain all key monetary policy parameters, citing the need to maintain the current momentum in disinflation and safeguard recent economic gains.

    The decision was announced following the 501st meeting of the Committee held on July 21–22, 2025, with all 12 members in attendance.

    Reading the communiqué at the end of the meeting, the CBN Governor and MPC Chairman, Mr. Olayemi Cardoso, said the Committee unanimously agreed to keep the Monetary Policy Rate (MPR) at 27.50%.

    The asymmetric corridor around the MPR was also retained at +100/-500 basis points, alongside the Cash Reserve Ratio (CRR) of 50% for deposit money banks and 16% for merchant banks. The Liquidity Ratio remains unchanged at 30%.

    Cardoso explained that the decision was aimed at “sustaining the momentum of disinflation and sufficiently containing price pressures.”

    He noted that headline inflation has declined for the third consecutive month, falling to 22.22% in June 2025 from 22.97% in May—driven largely by easing energy prices and stability in the foreign exchange market.

    However, he acknowledged that underlying inflationary pressures persist. Food inflation rose year-on-year to 21.97% in June from 21.14% in May, largely due to higher costs of processed food. Core inflation, which excludes volatile items like farm produce and energy, also increased to 22.76% from 22.28% in the same period, reflecting rising costs in housing, utilities, communication, and personal care.

    On a month-on-month basis, headline inflation ticked up slightly to 1.68% in June, compared to 1.53% in May, driven by rising service and imported food prices.

    The Committee also flagged external risks such as geopolitical tensions and tariff disputes, which could worsen global supply chain disruptions and raise the cost of imports.

    On the domestic front, the MPC commended progress on the ongoing banking recapitalisation exercise, revealing that eight banks have already met the new capital requirements.

    Cardoso emphasised the importance of maintaining strong regulatory oversight to ensure continued financial system stability.

    “The Committee urges the management of the Bank to sustain its oversight of the banking system to ensure continued resilience, safety, and soundness,” he stated.

    The MPC also welcomed the Federal Government’s ongoing efforts to improve national security, which is aiding agricultural productivity. It called for sustained support in providing critical inputs such as high-yield seedlings and fertilisers for the current farming season.

    On broader macroeconomic indicators, the MPC noted that real GDP grew by 3.13% in Q2 2025, higher than the 2.27% and 3.38% recorded in the corresponding and preceding quarters of 2024, respectively. “In addition, recent data on the Purchasing Managers’ Index indicates that the Nigerian economy remains on an expansionary path,” the Governor said.

    Read Also: JUST IN: Inflation drops to 22.22% in June, says NBS

    The external sector, according to the MPC, remains stable, bolstered by increased capital flows, higher crude oil production, and improved non-oil exports. Gross external reserves stood at $40.11 billion as of July 18, 2025, providing about 9.5 months of import cover.

    “The external sector also remains stable and resilient despite persisting uncertainties in the global macroeconomic environment,” Cardoso noted.

    He assured that the Committee would continue to monitor developments both at home and abroad. “The MPC will continue to undertake rigorous assessment of economic conditions, price developments, and outlook to inform future policy decisions,” he said.

    The next MPC meeting is scheduled to be held between the 22nd and 23rd of September, 2025.

  • MPC members seek new options for FDIs flow to economy

    MPC members seek new options for FDIs flow to economy

    Members of the Monetary Policy Committee (MPC) have advised the Central Bank of Nigeria and the fiscal authorities on steps to be taken to boost Foreign Direct Investment (FDIs) flows to the economy.

    In their personal statements  during the last MPC meetings held in Abuja, released at the weekend, the committee members said Nigeria is not the only emerging market economy that experienced outflows of portfolio investments, and prescribed wayout for .improved foreign capital inflows to the economy

    They insisted that the key lesson from other countries, e.g., India, Indonesia, Vietnam, South Africa, etc., is to scale up improvements in overall investment climate to attract foreign direct investments which is much more sustainable.

    A member of the committee, Aloysius Ordu, said Nigeria needs urgent actions on this front, adding that efforts to diversify export base remains of utmost importance.

    “Measures are warranted to significantly boost oil production from 1.28 million barrels per day, which is well below the OPEC quota of 1.58 million barrels per day, especially as oil prices are above US$80 per barrel. Much more could also be done in the mining sector in view of the country’s rich endowment in mineral resources,” he said.

    “Clearly, monetary policy ought not be the only game in town for the express purpose of stabilizing Nigeria’s macroeconomy. An activist fiscal policy stance is urgently needed to bring inflation down quickly and painlessly,” he added.

    Ordu added that reducing Nigeria’s high inflation is both an economic and a political imperative of the first order.

    “The MPC acted promptly and decisively during the February-March meetings, deploying the blunt instrument of excruciatingly tight money. CBN staff presentations during the May meeting showed that Headline inflation (year-on-year) rose to 33.69 per cent in April from 33.20 per cent in March, driven by higher food and energy costs.” “Food inflation jumped to 40.53 per cent from 40.01 per cent and Core inflation rose to 26.84 per cent from 25.9 per cent during the corresponding period, on account of increases in the price of farm produce and processed food items; insecurity and infrastructure deficits; and cost-push factors including increased cost of fertilizers and transport logistics,” he stated.

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    The committee members said  the current state of play is wreaking havoc on consumers, particularly those on the lower end of the income scale who are more acutely feeling the pain from high inflation. This segment of our society is facing a myriad of challenges, including food and fuel, and they are financially strapped.

    Another member of the committee, Bala Bello, said the data also showed that previous monetary policy rate hikes and other complementary policies are yielding some positive results albeit slowly.

    He said the tightening the stance of monetary policy further to slow credit creation, combined with ongoing complementary fiscal policy initiatives is, thus, essential.

    “Exchange rate passthrough to domestic prices remains an important factor in the current inflation pressure. While the pressure on the naira reflects supply and demand imbalances in the foreign exchange (FX) market, I am certain that tightening the policy stance further would dampen demand pressure while also having a positive impact on autonomous FX supply as domestic yields improve. Recent approval of licenses of 14 international Money Transfer Operators is expected to improve remittance flows to dowse demand pressure,” he said.

    With regards to financial system stability, he said data presented at the meeting showed that all major financial soundness indicators (capital adequacy, nonperforming loans, and liquidity ratios) remained within their prudential thresholds.

    “While industry earnings ratios have also remained comparatively strong, there is the need to continue strengthening macro-prudential and capital buffers to further improve industry resilience to future shocks,” he advised.

    Another MPC member, Bandele Amoo, agreed with Bello. Amoo said specifically, the banking industry was adjudged relatively stable during the period under review as solvency and liquidity remained within the set regulatory standards.

  • Rates likely to go up after MPC maiden meeting

    Rates likely to go up after MPC maiden meeting

    There was a consensus yesterday that the benchmark interest rate will rise after the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN).

    It was confirmed last night that members of the reconstituted MPC under the chairmanship of the CBN Governor, Dr. Olayemi Cardoso, will today begin a crucial meeting expected to discuss how to strengthen Nigeria’s new macroeconomic direction and provide further clarity on policy expectations.

    Today’s MPC meeting is the first since Cardoso took the baton as governor at the apex bank and the reconstitution of the apex bank’s management team.

    The Senate approved new members for the MPC last week.

    The postponement of two previous schedules for MPC meeting had raised anxieties and there have been several policy adjustments since then, with the financial markets expecting the imprints of the apex bank that usually come through the MPC. The last MPC meeting was in July 2023.

    All finance and economy experts and think-tanks surveyed yesterday by The Nation were unanimous that the MPC would raise the Monetary Policy Rate (MPR) from 18.75 per cent to more than 20.00 per cent.

    Some said they expected the MPR to rise above 23 per cent. Others with most modest viewpoints put it around 20 per cent.

    The MPC, which is meeting between today and tomorrow, is headed by the Governor of the CBN and it is the highest policy-making organ of the apex bank. The MPC provides monetary policies and benchmarks, which determine the direction of the financial services sector, and the economy to a large extent.

    A major highlight of the newly constituted MPC was the broad and inclusive theme of the MPC membership, a decision experts have hailed as a necessary paradigm shift.

    For the first time, Nigeria’s capital market is taking a front seat in the MPC with the appointment of the Director-General of the Securities and Exchange Commission (SEC), Mallam Lamido Yuguda, as a member.

    SEC is the country’s apex capital market regulator and Yuguda’s appointment was an institutional representation.

    Others include Dr. Aloysius Ordu; Dr. Mustapha Akinkunmi and Professor Murtala Sagagi. They join the CBN governor, four deputy governors, and the Permanent Secretary of the Ministry of Finance to form an MPC, with an enviable convergence of private, public expertise and the academia.

    Experts agreed that the meeting comes at a critical juncture for the Nigerian economy. Inflation remains a major concern, while global economic uncertainties continue to cast a shadow.

    The MPC’s decisions on interest rates, liquidity, and other monetary policy instruments will have a direct impact on Nigerians and the overall health of the financial system.

    Those who spoke yesterday included Managing Director, AIICO Capital Limited, Mr. Femi Ademola; President, Association of Capital Market Academics of Nigeria, Professor Uche Uwaleke; Managing Director, APT Securities and Funds, Mallam Garba Kurfi and Managing Director, Highcap Securities, Mr. David Adonri.

    Others were major finance and economy think-tanks such as Cordros Capital Group, Afrinvest West Africa, Analysts Data Services and Resources (ADSR), Financial Derivatives Company (FDC) and Arthur Steven Asset Management, among others.

    Ademola said the MPC would consider quite a number of issues before taking a decision, especially in the face of rising inflation rate. Inflation rate hit a new high at 29.90 per cent in January 2024.

    According to him, inflation expectation implies that reducing the policy rate would not be appropriate until inflation start falling and the disinflationary process is certain, and this is not expected to begin until late in 2024.

    He pointed out that while global central banks seem to have reached the peak of their tightening cycles, interest rates are likely to remain significantly higher than pre-pandemic levels. This is because investors currently expect fewer rate cuts, given that inflation may remain high relative to historical levels.

    “Therefore, to maintain its price stability mandate, anchor inflation expectations, increase incentives for holding the naira, and boost foreign exchange (forex) inflows from foreign investors, the CBN will have to remain hawkish in its monetary policy decisions. Consequently, the MPC is likely to opt for an increase of up to 300 basis points increase in the MPR this year, starting with at least 100 basis points increase at the February 2024 meeting.”

    Uwaleke said the MPC will be playing catch-up in its monetary policy tightening stance, having missed two consecutive meetings last year.

    He said: “So, I expect an aggressive tightening posture that could see a hike in the Monetary Policy Rate by not less than 100 basis points, given elevated inflation and the current alarming level of exchange rate,” Uwaleke said.

    The professor pointed out that the presence of the SEC DG in the MPC is a welcome development.

    He added: “This (then inclusion of SEC DG) is something I have always advocated to better coordinate the regulation of financial markets. It is for this reason that in Kenya, for example, the Chairman of the Capital Market Authority is also on the Board of the Kenya Central Bank.

    “It goes without saying that monetary policies impact capital market performance. So, I expect the SEC DG to play the role of a dove, as opposed to a hawk, in the committee by adopting positions that tend to moderate any tendency by the MPC to hike rates aggressively,” Uwaleke said.

    Kurfi said there were already indications that the MPC would raise rates, citing the recent auction of treasury bills, during which ruling rates were significantly increased.

    He said: “Being the first, we wait to see the direction it intends to move on. The inclusion of DG SEC is a welcome development and we hope in taking MPC decision, the capital is not left aside,” Kurfi said.

    Adonri noted that with the MPC “now properly constituted with representation from various segments of the financial sector, monetary policy decisions are expected to be insightful and also more impactful”.

    According to him, the seeming delay in holding the MPC meeting might have also afforded the monetary authority sufficient time to reflect more on impact of previous policies, state of the economy and hence, formulate new policies that will lead to macroeconomic stability.

    Adonri said: “Areas that require monetary policy intervention include galloping inflation that has so far defied contractionary monetary policy, convergence of exchange rate, the continued Ways & Means Advances and credit availability. It will be interesting to see how MPC will tackle the current overheating of the forex market and the capital market.”

    ADSR, in its sentiment analysis of the decisions in previous MPC communiques, concluded that the scenario analysis showed that the next MPC meeting will likely decide to tighten further, to address rising inflation, raise real interest rate, and incentivize inflow of capital to support the naira.

    The report noted that such decision would have consequences, especially in higher cost of capital to businesses and the cost of borrowing to the national and sub-national governments, as well as investors’ returns on different portfolios.

    ADSR analysed a total of 109 MPC communiques released in the last 20 years, using a text-mining algorithm to score the sentiments of the communiques across CBN governors’ terms.

    Generally, the highest sentiment score was obtained from the communiques released under Soludo, 60.2 per cent, followed by Sanusi Lamido, 58.3 per cent and then Godwin Emefiele, 44.1 per cent.

    Cordros Capital stated that it anticipates a decisively hawkish stance from the MPC regarding interest rates, aligning with the CBN’s commitment to achieving price stability.

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    Cordros Capital pointed out that there has been a significant increase in interest rates in the fixed-income markets towards the inflation rate, signalling the CBN’s hawkish stance against inflation.

    It noted that the CBN had issued OMO seven times in five months to mop up excess liquidity in the system. In recent primary market auctions, the apex bank has over-allotted markets, particularly in the treasury bills market, pushing interest rates to record highs.

    “Given these moves, the heightened level of inflationary pressures and the increased volatility in the exchange rate, we think that the MPC will maintain a hawkish stance, increasing the policy rate aggressively by 150 basis points, pushing the policy rate to 20.25 per cent,” Cordros Capital stated.

    Afrinvest stated that it anticipates that the MPC might further tighten the anchor rate by between 100 and 200 basis points based on “stubborn domestic inflation, reluctance of global systemic central banks to cut rates, and the positive but modest domestic GDP growth numbers for 2023.

    “However, we canvass that the monetary authority should also consider stemming the growth of money supply in the financial system as broad money supply surged 76.4 per cent to an all-time high of N93.7 trillion as of January 2024.

    “The alarming growth in money supply might be detrimental to the efforts of the apex bank to stem the runaway inflation rate. In all, we do not see the MPC keeping rates constant, given the need to incentivise liquidity mop-up to tame inflation. Hence, a “hold’ stance is highly unlikely,” Afrinvest added.

  • MPC directs CBN to restrict banks access to bonds, treasury bills

    BANKS’ access to government securities is to be restricted, Central Bank of Nigeria (CBN) Governor Godwin Emefiele said yesterday.

    The Monetary Policy Committee (MPC), said the CBN boss, directed the apex bank to initiate policies or regulations that will facilitate the restriction.

    Emefiele spoke at the end of the MPC meeting in Abuja.

    He said: “In view of the abundant opportunities available to banks for unfettered access to government securities, which tends to crowd out private sector lending, the Committee called on the Bank to provide a mechanism for limiting DMBs access to government securities so as to redirect banks’ lending focus to the private sector, noting that this would spur the much needed growth in the economy.  It called on the government to use all machinery at its disposal to increase tax revenue to enable the government fund its budget adequately.”

    Emefiele added: “It is important and expedient that the MPC gives this directive to the management of the Central Bank because this country badly needs growth. For us to achieve growth, those whose primary responsibilities it is to provide credit, who act as intermediaries in providing credit and are accorded as the catalysts to the economy, must be seen to perform that responsibility.”

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    The CBN Governor lamented that Deposit Money Banks (DMBs) “would rather than performing that responsibility to the private sector that are the engine of growth of an economy, they would be directing their liquidity to other sectors of the economy”. “This is what the MPC frowns at and, therefore, giving the management of Central Bank the power to limit the DMBs’ propensity or their appetite for just going for government securities rather than directing credit to private sector of the economy.”

    Emefiele noted that “the truth is that according to our own regulations, there is a particular minimum percentage of treasury bills or government securities that the bank must invest in order to remain liquid. But again, we have observed – and unfortunately too and increasingly so  – that the banks, rather than focusing on granting credit to the private sector, they tend to direct their focus to mainly in buying government securities.”

    The CBN management, Emefiele said, “would certainly take this up and will think of how to do that.”

    On Non-Performing Loans (NPL), the CBN governor said banks had always expressed some resistance to increasing credit ratio to the private sector, given the bad experience surrounding NPL.

    However, the MPC, he announced, has also directed the management of the CBN to “think about administrative, legal and regulatory framework to be put in place to ensure that some of the credit risks that are associated with granting loans to the private sector that ultimately result in NPLs should be mitigated such that when banks decide to begin to lend to the private sector or increasingly that the probability that NPLs would rise should be moderated.”

    The MPC welcomed the improvement in financial soundness indicators, but noted that although the NPLs ratio moderated, it remained above the prudential benchmark. Consequently, the committee considered and recommended to management a proposal to develop a comprehensive administrative legal and regulatory framework to speed up the recovery of delinquent loan facilities of the banking system by taking part in structured engagement with relevant stakeholders and authorities to mitigate credit risk and ultimately open up the credit delivery space in the Nigeria economy.

    Also at the briefing, the CBN stated that the MPC resolved to retain the Monetary Policy Rate (MPR) at 13.50 per cent; retain the asymmetric corridor of +200/-500 basis points around the MPR; retain the Cash Reserve Ratio (CRR) at 22.5 per cent; and retain the Liquidity Ratio at 30 per cent.

    He said that those who voted for a retention of rates at its present level believe the decision “was essential for better understanding of the momentum of growth before determining any possible modifications. They also felt that retaining the current policy stance provides an avenue for evaluating the impact of the apex bank’s intervention policies to support lending to the priority sectors of the economy”.

  • CBN slashes interest rate to 13.5%

    FOR the first time in more than two years, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) yesterday adjusted interest rate downwards to 13.5 per cent.

    Central Bank Governor Godwin Emefiele told reporters after the second MPC meeting that “the MPC voted to adjust the Monetary Policy Rate (MPR) by 50 basis points from 14 to 13.5 per cent; retain the asymmetric corridor of +200/-500 around the MPR; retain CRR at 22.5 per cent and retain the liquidity ratio at 30 per cent.”

    Emefiele said in arriving at the decision to adjust MPR (interest rate) downwards, “the committee was convinced that doing this will further uphold the banks’ commitment to promoting strong growth by way of encouraging credit flow to the productive sectors of the economy.

    “The MPC also felt that through loosening by a marginal rate, will serve to manage the sentiments in the capital flow market owing to the wider spread in yields in the emerging markets and the developing economies relative to the advanced economies. Moreover, the real interest rates will still remain positive.”

    Asked if there was a relationship between slashing interest rates and the loosening stance of the MPC as signalled yesterday, and funding Small and Medium Enterprises (SMEs), Emefiele explained: “To a reasonable extent, there is a relationship between lending to not just SME but to the agriculture, manufacture and the real sectors of the economy and our decision today.

    “The reason being that if you consider the fact that, for instance, January 2017, inflation had risen 18.72 percent and by December 2017, as a result of the pressure on the foreign exchange market, reserves have dropped to about $23 billion and by that same month, even what was accruing into Central Bank had dropped to about $500 million from as high as over $3 billion sometime in August 2013/2014.

    “Exchange rate as a result of the pressure had accelerated to as high as N525 to a dollar. But if you compare those numbers with where we are today, the inflation at 11.3 per cent, foreign reserves at close to $45 billion, and we feel this trend will continue. Exchange rate converging in all the markets at between N358 to N360, GDP being in positive trajectory consecutively for five to six quarters, then you will agree with me that there is relative stability and we have proved that there is sustainability in the level of macroeconomic indices in Nigeria.”

    Defending the decision further, Emefiele noted that “having being on this part, particularly the MPR  at about 14 per cent since July 2016,  and with the relative stability we have seen in the macroeconomic variables over the last two to two and a half years, we just think that this should be the next phase where we begin to think about consolidating growth. This should be the next phase where you should be talking about how do we create more jobs and reduce the level of unemployment in our country for people.

    “We believe this should be the next phase where we should be talking about how do we diversify the base of the Nigerian economy? And that in doing that, we will continue to keep our eyes on the stability that we have achieved so far in the macroeconomic environment. We will continue to do what we have been doing that is keeping inflation low, we will continue to do what we are doing that is keeping the exchange rate stable, we will continue to do what we are doing to ensure the reserves remain on positive trajectory at comfortable levels to be able to sustain the level of growth in our economy.”

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    The CBN boss, however, sounded a note of caution, saying “there is a need for us to say, listen, we need to consolidate on what we have achieved so far and that is to begin to look at the level of growth again.

    “Looking at growth again also means that while keeping our eyes on those other parameters, let’s see whether we can signal a direction from the monetary policy to the direction of supporting and really accelerating growth in the country.”

    Accelerating growth, he explained, “means that we need to push harder to consolidate GDP, we need to push harder to make sure we create jobs and we need to push harder to diversify.

    “So, doing this will naturally mean that we are softening gradually, but I repeat and it shouldn’t be mistaken that we will continue to do what we are doing, what we have done in the past, keeping inflation at a moderated level, we will continue to do so. I think we are moving in the right direction.”

    Asked if this new level of ease on the interest rate will put pressure on the naira, Emefiele said: “The answer is a capital no, I don’t see that happening. Like I just told you that we have seen stability in the market over the last two to two and a half years and there is no need for anybody to worry. We will withstand any pressure.”

    When questioned if Nigeria is prepared for any economic pressure, the governor answered: “We have gone through it in 2015, 2016 and 2017. With the support of everybody, our management and MPC members were able to overcome such challenges and I do not think that there is any challenge that the management of the Central Bank cannot surmount. We would surmount them.”

    On the growth projection of 2.7 per cent by the CBN, Emefiele said: “We have actually been in positive growth trajectory in the last five to six quarters with an average GDP growth of about 1.9 per cent. I think that if you look at the trend from 2017 into 2018, we will naturally say that if we push hard, even harder than we have done in the past, that we should be able to attain the 2.7 per cent and three per cent growth.

    “What we are just trying to say here is that with the data available, and with consistency and with the push, that we are positive we will be trending towards 2.7 per cent  to three per cent in growth rate which is actually not fantastic if you consider where Nigeria’s growth trajectory has always been around five per cent.

    The MPC decided by a vote of six out of 11 members to reduce the MPR by 50 basis points, that is 0.5 per cent. Two members voted to reduce MPR by 0.25 per cent –  that is 25 basis points. A member voted to reduce it by 100 basis points, which is one per cent.

    Two members, however, voted to hold MPR at its current level. Ten members voted to hold all other parametres constant while a member voted to reduce the Cash Reserve Ratio (CRR) by 100 basis points from 22.5 per cent to 21.5 per cent.

    The CBN governor also reacted to concerns raised over the impact of the discounted CRR, stressing. “We received a couple of demands but not many of those demands met our expectations. Don’t forget that this is money – liquidity that should be sterilised in central bank as cash reserve requirement, making them available to the banks and doing that we must make sure that they go into the employment and growth stimulating sectors of the economy: like agriculture and manufacturing. We will make sure that this liquidity given to the banks must be for projects and expansion plan.”

    The decision to slash interest rate, he explained, followed the action of “banks themselves which have started dropping the interest rate very marginally. But we are trying to let them know that in fact, in this case, I will say that we are following them. That is why we say that we are signaling. We are signaling in the sense that with time this will permeate the entire banking sector and people will begin to see the expected impact.”

    When asked if it will be the beginning of MPC rate cutting circle, Emefiele said: “I’ve not said so. I repeat, don’t quote me wrong, I only said it is a signal, but we will continue to do what we are doing that is keeping our friends happy, keeping everybody happy. But we are going to see if it will take us to the real growth trajectory that we so desire for Nigeria.”

    The MPC also noted the need to rebase the economy (GDP), which was last done in 2010.

    Reacting to this development, Prof Uche Uwaleke of the Nasarawa State University said: “The reduction in MPR by 50 basis points signals the CBN’s desire to relax monetary policy to support economic growth. Obviously, it is a right response to the declining inflationary pressure and the relative stability in exchange rate which have prevailed for quite some time.

    “Moreover, on the external front, crude oil price has stabilised around $65 per barrel while the US interest rate normalisation has slowed down. All these must have combined to influence the MPC decision which is expected to increase the flow of credit to the real sector.

    “The reduced MPR will also be positive for the capital market as some of the increased liquidity that will ensue will flow into the equities market. Also, it will be cheaper for the government to issue bonds, given that part of this year’s budget deficit will be financed through domestic borrowing.”

  • MPC seeks 5% interest rate on loans to farmers

    A member of the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) Balami Hassan wants interest on loans borrowed under the Anchor Borrowers Programme (ABP) to be pegged at five per cent.

    In his personal note on the last MPC meeting released yesterday, he said the government lowered the treasury bills rate from 18 per cent to 10.5 per cent.

    This has made the treasury bills less attractive to the deposit money banks (DMBs) and encourages them to extend more credit to the private sector by reducing their lending rate to single digit because of increase in their liquidity holdings.

    “In my opinion, the Anchor Borrowers Scheme should be modified by slashing the interest rate from nine per cent to five per cent. The five per cent interest rate should be shared between the CBN (three per cent) and banks (two per cent) participating on the programs to promote accessibility to credit and growth in the economy,” he said.

    Hassan said credit expanded to the private sector of the economy will positively impact on those operating in the real sector of the economy such as agriculture, industry and manufacturing, as well as mining and quarrying.

    He said: “This will play an important role in stimulating growth in the economy specifically in employment generation sectors. The current rate of growth in the economy is positive, but below the domestic desired growth rate of five per cent or six per cent, given the rate of population growth rate of about 2.5 per cent.

    ” The marginal improvement in growth rate, inflation, Capital Adequacy Ratio, non-performing loans, liquidity ratio of the banking sector and the relative stability in the foreign exchange market calls for a hold on the monetary policy stance.

    “This is so because further tightening would reduce output and dampen growth. On the other hand, loosening would not be on the menu because it is likely to cause inflation and destabilise the foreign exchange market and encourage outflow of both FDIs and FPI which the economy is in dire need of. I therefore vote to retain.”

     

  • MPC ‘to protect capital inflow, keep rates’

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), which will be meeting today and tomorrow, will not change existing policy rates, The Nation has learnt.

    The committee will take measures to ensure that more foreign capital flows into the economy to check capital flow reversals as 2019 elections approach.

    A report from the Economic Intelligence Unit, Access Bank Plc, said the committee will retain Monetary Policy Rate (MPR) – benchmark interest rate at 14 per cent, given the anticipated expansionary impact of fiscal spending following the signing of the 2018 budget. The committee will also retain the Cash Reserve Requirement (CRR) at 22.5 per cent; Liquidity Ratio at 30 per cent and maintain the foreign exchange policy, which has brought stability and boosted market liquidity.

    Likewise, analysts at Afrinvest Limited, an investment and research firm, said the MPC must keep a delicate balance between growth and price stability, we believe the Committee will maintain status quo on all policy rates in order to avoid upsetting the current economic momentum,: they said, adding:

    “Our position is on a balance of factors underscored by careful analysis of sustained positive conditions in global commodity markets alongside emerging market risks and continued disinflation amid steady but weak growth momentum. We further highlight our considerations below.”

    They said going by the May 2018 meeting’s minutes, members continue to keenly watch developments in global financial and commodity markets, given the connection to Nigeria’s external position.

    “Although no material change has occurred since the last meeting, mixed market sentiments prevail. In the commodity markets, oil prices remained favourable, though slightly lower at $73/barrel compared with a year-to-date high of $80/barrel as OPEC and its allies, parties to the output cut deal, agreed to boost supply by 1mb/d. Saudi Arabia and Russia with excess output capacities are expected to be the biggest gainers from this decision which is anticipated to occasion a slight downward global oil price correction. Nonetheless, we believe conditions will continue to favour Nigeria’s fiscal and external balance positions. In the same vein, foreign capital reversals have continued unabated in emerging markets though with tapered impact on Nigerian assets,” they said.

    According to Afrinvest, the stable outlook on oil prices is expected to prop the capacity of the CBN to keep defending the domestic currency with the exchange rate of naira to the greenback stabilising at N305.85/US$1.00.

    “Foreign reserves accretion – which slightly moderated 0.6 per cent to $47.4 billion from $47.7 billion as at the May MPC Meeting due to increased forex demand – was supported by improved domestic oil production with daily output at 1.7 million barrel/day,” they added.

    The exchange rate continues to hold steady at N360/$ in both the Investors’ and exporters’ FX window and parallel markets, supported by stable foreign reserves that have sustained CBN’s intervention amid the exit of portfolio investors.

     

  • Rates to remain unchanged as MPC meets today

    Despite the rising calls by economic experts for lowering of benchmark interest rate, the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC) is expected to retain all rates as they are since July 26.

    The MPC’s second meeting of the year holding today and tomorrow in Abuja, from all indication, won’t adjust the rates with the Monetary Policy Rate (MPR)- benchmark interest rat 14 per cent; Cash Reserve Ratio (CRR) at 22.5 per cent and Liquidity Ratio (LR) at 30 per cent and the Asymmetric corridor at +200 and -500 basis points around the MPR.

    “We expect emphasis to be placed on the need to withstand a possible pass through inflation from rising global inflation as well as protect the economy and financial markets against rising downside risk of capital flow reversals,” analysts at Afrinvest West Africa said.

    According to the investment and research firm, developments in the global economy and financial markets are likely to be viewed with mixed feelings by the MPC.

    It said that much to the delight of policymakers in commodity exporting countries, oil prices hit $80.0/barrel mark last week – its highest since June 2014 – against the backdrop of the US exit from Iran’s nuclear deal as well as falling inventory levels and subsisting impact of OPEC’s production cut deal.

    “Higher commodity prices is a boon to Nigeria’s external sector stability and fiscal balance, but it also comes with attendant risk of ballooning state’s petrol subsidy. On a balance of risks, we believe that external sector developments remain broadly favorable for Nigeria, supportive for economic growth and current monetary policy stance. Yet, the MPC will likely maintain its cautious view due to emerging downside risk of capital flow reversals,” they said.

    Besides, economic data releases since the last MPC meeting have mirrored current positive outlook for the economy. The Purchasing Managers Index (PMI) released for April indicated an expansion in the economy (Manufacturing PMI stands at 56.9 while Non-Manufacturing PMI at 57.9) while dis-inflation trend extended to the 15th consecutive month in April.

    Foreign exchange rate has already remained stable in all segments while External Reserves have stabilized around the $47.5 billion mark. “On the same day the MPC is starting, the Nigerian Bureau of Statistics -NBS is due to release first quarter 2018 Gross Domestic Product (GDP) numbers, which we expect to show continued expansion driven by low-base effect of Oil sector GDP as well as rebound in Trade and ICT,” they said.

    Afrinvest said the positive development in consumer prices within the last 14 months has presented the CBN with an opportunity to begin to converge Monetary Policy Rate (MPR) with market interest rates which have since priced-in inflation expectation.

    However, the decision will be delayed due to the ongoing capital flow reversal and asset prices volatility in emerging and frontier markets which is a downside risk to what has come to be the CBN’s prime policy anchor – Exchange Rate stability. “The current capital flow reversal has been the strongest test for liquidity in the Investors’ and Exporters’ Window (I&E Window) so far; a test it is yet to pass with flying colors. The CBN has responded to the volatility in the Fixed Income market and increased demand for foreign exchange by tightening liquidity in the money market in the past two week,” Afrinvest said.

     

  • CBN Deputy Governors, MPC members resume

    The Central Bank of Nigeria (CBN’s) new Deputy Governors, Edward Lametek Adamu and Mrs. Aisha Ahmad have formally assumed duty following their confirmation by the Senate.

    Also, three members  of the Monetary Policy Committee (MPC) of the apex bank, Prof Adeola Festus Adenikinju, Dr. Robert Asogwa and Dr. Aliyu Rafindadi Sanusi were also at the CBN’s headquarters to formally commence their tenure.

    While welcoming the new Deputy Governors and MPC members, CBN Governor Godwin Emefiele, just before they subscribed to the relevant Oaths of Office, congratulated them on their respective appointments by the president and subsequent confirmation by the Senate.

    Joined by Adebayo Adelabu and Dr. Joseph Okwu Nnanna, Deputy Governors in charge of Operations and Financial System Stability (FSS), respectively, Emefiele, expressed gladness that the bank now has its full complement of Deputy Governors to enable it operate optimally and get the required quorum to enable the MPC hold its statutory meetings for formulating monetary and credit policy.

    He urged the new appointees to bring their experience to bear in the discharge of their new responsibilities, stressing that much was expected of them.

    After they subscribed to their Oath of Office, administered by the Acting Director, Corporate Secretariat at the CBN, Mrs. Alice Karau, the Director, Monetary Policy Department (MPD), Moses Tule, read out the Charter of the MPC to the new members before they retired into their maiden MPC retreat, preparatory to the first MPC meeting for 2018 scheduled to hold on Tuesday and Wednesday, next week.