The Central Bank of Nigeria Monetary Policy Committee has retained the country’s headline interest rate at 14%.
The committee reached its decision based on associated risks to banking liquidity and whereas the drop in inflation, the rate is still high.
The committee said the continuous tightening of interest rate will worsen economic situation. The committee noted that the cost of capital is high for the growth of the economy should the tightening remain.
The reason for the unchanged rate was hinged on the inflationary tendencies that will arise should the rate be cut. The committee voted by 8-0 to retain all parameters of the foreign policy.
Godwin Emefiele, Governor of the Central Bank of Nigeria said the bank will defend the Naira by ensuring the Forex market is having a sustainable supply.
He added that the committee was happy with the improved liquidity in the Forex market, a gradual return of portfolio investors who are buoyed by the former.
The release of the MPC decision is in coming the same day with the gross domestic report which showed that Nigeria’s economy contracted by 0.52% in the first quarter of the year. The fall, however, is smaller to the same quarter last year when the GDP fell by 1.46%.
The oil sector showed the biggest slump with about 11% crash in contribution to the economy. The slow pace in the crash of inflation has proven that a weakened demand is responsible for the negative economic growth.
