CBN is expected to retain interest rate at 14%

CBN is expected to retain interest rate at 14%

The Monetary Policy Committee of the Central Bank is expected to keep headline interest rate at 14%.

Analysts at Access Bank’s Economic Intelligence Unit said the apex bank is expected toreach the following decisions at the conclusion of its meeting:

  • Retain MPR at 14%, leaving the asymmetric corridor of +200 basis points and -500 basis unchanged: The deceleration in inflation and slower rate of decline in GDP growth, make it very likely that the CBN will take a neutral stance with respect to the benchmark interest rate. Recent Communiqu├ęs by the MPC have implied that fiscal, rather than monetary expansion would be required to boost growth. The recent release of the Economic Recovery and Growth Plan (ERGP) signals that robust fiscal policy to complement monetary policy is underway.
  • Retain the Cash Reserve Requirement (CRR) at 22.5%.
  • Retain Liquidity Ratio at 30%.
  • Exchange Rate: We anticipate no change in the FX policy stance by the CBN as the monetary regulator evaluates whether the changes it enacted in February have been sufficient in improving liquidity.

For over six months, the MPC has kept headline interest unchanged due to galloping inflation that reached the highest in January 2016 at 18.72%.

As at February, inflation has dropped for the first time since last year when major policy decisions favoured increase in petroleum product prices and FX drought further worsened the matter.

Nigeria is still in the midst of the worst recession in over 25 years. The country is expected to have a positive growth before the end of the year. However, an inconsistent government policy and security in the Niger Delta could also hamper revenue targets that is badly.

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