The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) today retained the Monetary Policy Rate (MPR) at 14 percent.
The Committee members at the end of their two-day meeting in Abuja also voted in favour of the retention of the Cash Reserve Ratio (CRR) at 22.5 percent, the Liquidity Ratio at 30 percent and the asymmetric corridor at Asymmetric +200 to 500 basis points.
Briefing journalists at the end of the meeting, the Chairman of the Committee and CBN Governor, Mr. Godwin Emefiele, explained that the MPC left the rates unchanged for several reasons, including the non-passage of the 2018 budget which would determine the country’s fiscal direction and the rising trend of inflation in global markets and expected liquidity inflow in the 2nd half of the year from the 2018 budget and pre-election spending.
According to him, even if the MPR were to be lowered it would not translate to lower interest rates for the average Nigerian given the high operating costs of Nigerian banks.
The apex bank governor also hinted that the bank was putting finishing touches to the framework for the China swap deal, adding that both Standard Chartered Bank and Stanbic IBTC, which has the Industrial and Commercial Bank of China as affiliate, have been appointed as settlement banks.
Emefiele also disclosed that the regulatory banking institution was also working on a policy that would penalize banks with excess liquidity in a bid to encourage lending to the real sector
The Monetary Policy Rate (MPR) is the rate at which the CBN lends to commercial banks and it theoretically serves as the benchmark rate that banks use lend to customers.
The Cash Reserve Ratio (CRR) is the proportion of a bank’s deposits it has to hold as deposits either in cash or with the CBN and the Liquidity ratio is the ratio of a bank’s liquid assets to its liabilities. It is a bank’s cash balance plus assets that it can convert to cash to the total liabilities owed by the bank, which is typically deposits.
The Asymmetric corridor is the range within which the MPR can either be raised or lowered. The maximum the rates can thus be increased is 2%, and the lowest it can be lowered by is 5%.
