The Central Bank of Nigeria, Monetary Policies Committee, MPC, held its meeting on Tuesday, July 25, held its Monetary Policy ratio, benchmark interest rate at 14 percent.
Governor of the apex bank, Godwin Emefiele said members of the monetary policy committee were faced with either holding or cutting the benchmark interest rate.
He said they chose to leave rates unchanged for the sixth consecutive meeting because the risks associated with easing monetary policy included “a resurgence of inflation” and the “possible exit of foreign portfolio investors”.
“In consideration of the headwind confronting the domestic economy and the uncertainty in the global environment, the committee decided by a vote of six to two to retain the MPR (monetary policy rate) at 14 percent,” said Emefiele.
The bank also kept its cash reserve ratios for commercial banks at 22.5 percent.
The nation’s economy shrank by 0.52 percent in the first quarter, less than the revised contraction of 1.73 percent in the fourth quarter. Rising oil production and higher crude prices helped keep it from shrinking more. The budget ministry forecast in March forecast the economy would grow 2.19 percent in 2017 .
Emefiele warned of the risks associated with an economic recovery that owes much to a fragile ceasefire by militants whose attacks on energy facilities last year in the southern Niger Delta cut oil production by more than a third.
“The committee cautioned that this recovery could relapse in a more protracted recession if strong and bold monetary and fiscal policies are not activated immediately to sustain it,” he said.
He said growth from non-oil receipts, an expected fiscal stimulus, agriculture, services and light industries “must be pursued relentlessly”.
Razia Khan, chief Africa economist at Standard Chartered Bank, said “the rhetoric around the economic recovery has changed very subtly”.
“It is no longer seen as something that might happen on auto-pilot. Risks to the 2017 recovery are seen to be more substantial,” she said.
Nigeria is also contending with dollar shortages caused by low oil prices, which pushed up inflation throughout 2016. But annual inflation has slowed for five months, easing to 16.1 percent in June.
Emefiele said that although the committee had held the benchmark rate on this occasion, the committee felt lower interest rates were needed in the longer term.