The 278th convention of the CBN’s Monetary Policy Committee (MPC) held on Monday and Tuesday in Abuja in the light of lingering uncertainties associated with the COVID-19 pandemic, the existence of unsavoury inflation numbers at 17.33 per cent, economic recession, saw the committee maintain all policy levers at 11.50 per cent for the third time since the last cut from 12.50 per cent at the September 2020 MPC meeting.
This was revealed by Godwin Emefiele, the CBN Governor while reading out the policy committee’s communiqué at the CBN headquarters in Abuja on Tuesday, where he stated that the decision comes following a unanimous vote of all committee members to keep parameters unaltered with a view to provide an opportunity for further consolidation as members expressed concerns over rising domestic prices.
According to the CBN Governor, “the committee was confronted with a dilemma on the focus to reign in on inflation also tackle rising domestic prices and rising non-performing loans (NPLs). It also expressed that a tightening stance may return the economy into recession as we drive to focus on economic consolidation. However, the contractionary stance may help to lose the trend of inflation.
“Supporting interventions by the central bank in ICT, manufacturing, agriculture, services, creative industry, and health sector intervention, and continuous credit to households that were adversely affected by covid-19 from the CBN have also continued to help stimulate growth in the real sector through increased credits to help cushion the effect of inflation.”
The decision by the committee is, however, in line with the expectations of economic analysts who are well familiar with the matter and expressed their positions on the expected outcome from the MPC’s convention saying the committee will maintain rates based on the burgeoning needs to stimulate economic activities and create jobs, and the need for the CBN to continue treading the delicate path between pro-growth policies and anti-inflationary policies. Also, they further revealed that as rates are kept unchanged, the interest in the equities market is expected to be continual as low yield in the fixed income market is expected to linger.
Moreover, the CBN maintained by a unanimous vote the asymmetric corridor of +100/-700 basis points around the MPR; retained the CRR at 27.5 per cent; and also retain the Liquidity Ratio at 30 per cent. Although, the policy committee was of the view that this will be of great benefit as it will allow current policy measures to permeate the economy while observing the trend of developments with the Q1 2021 GDP numbers expected to drive further reactions and projections.