The Central Bank of Nigeria (CBN) on Tuesday kept its benchmark interest rate on hold to battle persistently high inflation even as it seeks to boost lending to grow the economy.

CBN Governor Godwin Emefiele disclosed this decision during a press conference at the end of a two-day Monetary Policy Committee (MPC) meeting held at the apex bank’s headquarters in Abuja.

He explained that the committee unanimously voted to retain the MPR, after the rates were reduced from 14 percent to 13.5 percent in March 2019, the first time the MPR was reduced since July 2016.

Tuesday’s unanimous decision compares with nine members of 11 who voted for an unchanged stance in May, when two favored easing.

“The committee decided unanimously by a vote of all members present to retain MPC at 13.5 percent and hold all other key parameters constant.

“The decision was informed by the conviction of members that key macro-economic indicators are trending in the right direction and because of the lag in the effects of policy actions on output,” Emefiele said.

He explained that the committee decided to hold the Cash Reserves Ratio at 22.5 percent and retain liquidity ratio at 30 percent.

“The MPC voted to retain the asymmetric corridor at +200 and -500 basis point around the MPR, Retain the CRR at 22.5 percent and retain liquidity ratio at 30 percent.”

Key Insights

The unchanged stance could signal that Emefiele may double down on other measures to boost credit extension in an economy that’s still recovering from a contraction in 2016. The central bank announced this month that lenders will no longer receive interest payments on deposits exceeding 2 billion naira ($5.5 million) and it has ordered banks to increase their loan-to-deposit ratio to at least 60% by September or face penalties.

While inflation in Africa’s top oil producer slowed to 11.2% in June, it has been above the target range of 6% to 9% for more than four years. That, and the need to attract foreign inflows to prop up the naira, limits the scope for more rate cuts after 50 basis points of easing that was announced in March.

•Based on reports by Bloomberg and Channels TV.

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