The Monetary Policy Committee (MPC), of the Central Bank of Nigeria (CBN), has decided to retain the Monetary Policy Rate (MPR) at 11.5%
This was disclosed by Governor, CBN, Godwin Emefiele while reading the communique at the end of the MPC meeting on Tuesday 26th January 2021.
Other parameters such as Cash Reserve Ratio (CRR), Liquidity ratio, and asymmetric corridor remain unchanged.
According to Emefiele, MPC was of the view that it should pursue its current stance of systematic synchronization of monetary and fiscal policy accommodation through its developmental finance initiatives. This is aimed at quickening the recovery process of the country’s economy.
“Although the economy is currently in a stagflation environment with simultaneous occurrence of inflationary pressures and contracting output, the MPC resolved to reverse both developments and continue pursuing price stability in growing the economy”, He said.
On the other hand, the committee also opined that an aggressive expansionary stance could worsen both inflation and the negative real interest rate, thereby affecting the exchange rate negatively.
The Central Bank’s decision to retain the benchmark interest rate at 11.5% is in line with its move to boost consumer spending by increasing credit facilities to households, SMEs, health, agricultural, and the manufacturing sector so as stimulate the Nigerian economy.
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Holding the rate will also encourage borrowing, as lending rate by banks is expected to remain low.