The much awaited monetary policy committee, MPC meeting came and change key segments of the current status quo in Nigeria monetary policy.
As part of the decision reached by the MPC, monetary policy rate, MPR which is the rate at which banks lend money was kept at 12%. This is aimed at tackling inflation while still allowing the market not to be staffed of liquidity. The last inlfation figure from the National Bureau of Statistics puts inflation at 13%, the MPR is just 1 percentage difference.
The elephant in the room was the Forex policy which was overdue for review. The MPC “the MPC voted unanimously to adopt greater flexibility in exchange rate policy to restore the automatic adjustment properties of the exchange rate”.
According to the MPC, “The Bank would however, retain a small window for funding critical transactions. Details of operation of the market would be released by the Bank at an appropriate time.”.
As major highlights of the MPC’s decision, the committee agreed that:
i)Retain the MPR at 12.00 per cent;
(ii) Retain the CRR at 22.50 per cent;
(iii) Retain the Liquidity Ratio at 30.00 per cent; and
(iv) Retain the Asymmetric Window at +200 and -500 basis points around the MPR 13
(v) Introduce greater flexibility in the inter-bank foreign exchange market structure and to retain a small window for critical transactions.
The review of the Forex policy is expected to lessen the level of negative sentiments in the financial markets, portfolio investors are expected increase their exposure to the market, this is expected to boost trading at The Exchange. However, the slower the implementation of the policy, the slower the impact is expected to be felt