CBN holds interest rate at 10-year high despite exit from recession

The monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) has decided to hold the key interest rate, which serves as the national lending rate, at 14 percent despite the economy’s exit from recession.

Godwin Emefiele disclosed this on Tuesday after the MPC meeting in Abuja.

He said the committee considered holding the rates because it would allow more clarity for the economy.

The committee also attributed the high food index to attacks on farmers by herdsmen and flooding in some parts of the country.

On July 26, 2016, the committee voted that the rates be pegged at a 10-year high.

“The committee noted that the negative real interest rates did not support the recent flexible foreign-exchange market as foreign investors’ attitude had remained lukewarm, showing unwillingness in bringing in new capital,” Emefiele said at the time.

“The MPC was further concerned that while the situation called for obvious tightening of the monetary policy stance, the technical recession confronting the economy and the prospects of negative growth to year-end needed to be factored into the policy parameters.”

Cash reserve ratio (CRR) and liquidity ratio were maintained at 22.5 percent and 30 percent respectively.

The committee also said investors favoured the investors forex window to the parallel market.

It also commended the federal government for signing the executive order on ease of doing business.

The economy had slipped into its worst recession in 29 years in August 2016.

Data available from the National Bureau of Statistics showed that the economy experienced positive gross domestic product growth for the first time since August 2016 in Q2 2017.