CBN intensifies inflation battle, retains record-high interest rate

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has opted to maintain benchmark interest rate at record-high, intensifying its battle against inflation.

Godwin Emefiele, governor of the CBN, who made the disclosure at the central bank headquarters in Abuja, said the committee decided that monetary policies alone could not totally save the economy.

He also called on the fiscal side of government to complement the CBN’s monetary policies.

All 10 members of the MPC voted to keep interest rate at 14 percent. Cash reserve ratio (CRR) and liquidity ratio were also maintained at 22.5 percent and 30 percent respectively.

Kemi Adeosun, minister of finance, had earlier urged the monetary side of government to cut interest rates, in a bid to make it easier for the federal government to take loans for stimulating the economy.

“My position has been, look, this government is spending its way out of trouble, and that spending, much of it is being borrowed. So if you increase the interest rate, you increase our cost of debt service,” Adeosun had said.

Emefiele said the CBN had been down this road, and it was sure that cutting rates without appropriate fiscal plans may not help the economy, urging the fiscal side to fasten the budget-implementation process.

He said he was more optimistic about the inflow of foreign investment today than he was during the last MPC meeting, further stating that $1 billion had come into the economy in the past two months.

Emefiele noted that inflation had gradually begun to recede since the bank’s last MPC decision, signalling that the decisions were having expected effects on the economy.