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Key policy parameters have been retained as the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) concluded the second meeting for the year today.
Members voted to keep the Monetary Policy Rate (MPR) at 11.5 per cent for the nine consecutive meetings since September 2020. CBN committee also held the Asymmetric corridor around the MPR at +100/-700 basis points with the Cash Reserve Ratio (CRR) at 27.5 per cent; and the Liquidity Ratio (LR) at 30.0 per cent.
The MPC noted that the available data on key macroeconomic indicators suggest the likelihood of subdued output growth for most of 2022. The committee expects that monetary and fiscal stimulus will continue to support the recovery until downside risks to growth and inflation dissipate substantially.
The committee also noted that inflation is being confronted with upward pressure due to emerging risks within the domestic and external environment.
There are growing concerns around the uptick in global prices of commodities which have been worsened due to supply shortage of petroleum products, analysts explained.
In the near term, the MPC urges NNPC to take urgent steps to ensure an adequate supply of petroleum products to reduce the rate of arbitrary increase in the price of these petroleum products by oil marketers.
The committee noted the sustained improvement in the equities market within the review period. Although the liquidity ratio remained well above the prudential limit at 43.5% in February 2022, the capital adequacy ratio moderated slightly to 14.4% in February ’22 from 14.5% in December ‘21.
In addition, the MPC noted the sustained resilience of the banking system evidenced by the further moderation of the NPL ratio to 4.84% in February ’22 from 4.85% in December ’21. The MPC noted that loosening could trigger excess liquidity and fuel inflationary pressure.
On another note, given the fragile state of the current GDP growth rate and potential domestic and external headwinds from the Russia-Ukraine crisis, tightening could stifle the expected investment expansion required to drive growth and absorb economic shocks.
The hold stance indicates a precautionary and consistent policy choice, given the prevailing economic conditions particularly as further economic and financial shocks are exerted from the ongoing Russia-Ukraine crisis, Coronation analysts said.
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