BY NKECHI NAECHE-ESEZOBOR–The Central Bank of Nigeria’s Monetary Policy Committee (MPC) has retained the Monetary Policy Rate (MPR) at 11.5 per cent.
The committee also left Cash Reserve Ratio (CRR) and Liquidity Ratio at 27.5 per cent and 30 per cent respectively.
Mr Godwin Emefiele, the CBN governor who presenting a communique of the 133rd MPC meeting had reduced the MPR from 12.5 per cent to11.5 per cent at the last MPC meeting in September.
Emefiele said that the meeting was focused on how to quickly exit the COVID-19 induced recession, which the country recently entered into.
“The meeting was focused not only on price stability but also on the need to speedily take actions to exit the recession.
“In view of these considerations, the choices before the committee were focused on whether to tighten the stance of policy to address rising price levels recognising its primary mandate of price stability; to ease to support output recovery; or to hold to allow existing policy initiatives to permeate the economy.
“The committee noted that although the appropriate response to rising inflationary pressure will be to tighten the stance of policy in order to moderate upward pressure on prices, it nevertheless feels that doing this will exert downward pressure on the recovery of output growth,” he said.
The governor said the MPC also felt that tightening would negate the bank’s desire to expand credit to the real sector at affordable terms not only to boost production but also to increase consumer spending.
“To the committee, tightening is therefore not the appropriate response at this time.
“With the economy, whereas MPC feels that government spending and bank’s expansionary stance will be desirable to support recovery and guide the economy out of recession, it feels loosening will trigger excess liquidity and worsen the inflationary pressure.
“MPC also felt that excess liquidity may impact demand pressure and fuel further depreciation of the naira.
“With respect to a hold position, the committee was of the view that this will be beneficial as it will allow current policy measures to permeate the economy while observing the trend of developments,” he said.
He said that the committee also felt that the heterodox policies of the bank targeted at various sectors were showing positive results that would further engender growth.
