Nigeria’s MPC Rates on Hold Amid High Inflation

In line with expectations, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria at the end of today’s meeting elected by a vote 6 out of 10 members to retain all policy rates.

These include the Monetary Policy Rate (MPR) at 11.5%, asymmetric corridor around the MPR at +100/-700bps, Cash Reserve Ratio (CRR) at 27.5% and Liquidity Ratio (LR) at 30.0%.

The disposition of the CBN suggests a possible rate hike in the second half of 2022, said analysts at Cardinal Stone Partners in response to the MPC decision.

Three MPC members voted for 25 basis points (bps) rate hike and 1 voted for a 50 bps increase.

“In our view, the committee’s decision seems reasonable, as a hike may not necessarily curb the current inflationary pressure due to its supply-sided nature and could also constrain credit creation to the real economy,” the analysts said.

Generally, dealing concurrently with rising inflation and slack economic activity can be challenging for monetary policy because policy instruments work more often on the basis of trade-off between output and inflation.

Structural bottlenecks such as security challenges, which prevented farmers in major food producing regions from accessing their farms, and infrastructural gaps that hampered movement of food crops from farm to market, has exacerbated inflationary pressures.

MPC members have previously called for an urgent need to address the structural rigidities fueling inflationary pressures to ramp up productive capacity in the agricultural sector and reduce supply side impact on food prices.