Central Bank Retains Rate at 11.5% for 9th Session

Central Bank Retains Rate at 11.5% for 9th Session

By Bashir Olanrewaju

The Central Bank of Nigeria’s Monetary Policy Committee retained its benchmark-lending rate at 11.5 percent at its second meeting of the year on Monday in Abuja, citing concerns about the economic impact of the war in Ukraine. It was the ninth straight session at which the key rate was left unchanged.

The MPC equally took a unanimous decision to keep the cash-reserve requirement for banks at 27.5 percent and the liquidity ratio at 30 percent, Central Bank of Nigeria Governor Godwin Emefiele said at a news briefing.

Committee members had little room to manouvre given Nigeria’s current economic circumstances characterized by high debt and low revenue in the face of decreasing foreign reserves. At a time President Muhammadu Buhari’s government chose to continue paying fuel subsidies, the war in Ukraine had caused a sharp jump in prices, escalating the subsidy costs when the country’s low oil output won’t let it benefit from high crude prices.

Even with February annual inflation showing an uptick to 15.70, the MPC couldn’t afford to raise rates. And with the government poised for increased spending with looming 2023 general elections, members didn’t feel confident enough to lower the benchmark rate either.

Shortages of gasoline and diesel since February, compounded by widespread power cuts across the country, added to inflationary pressures that offset even the deceleration of the food index that had been the main spur for price rises.