At the end of its 267th meeting, the third for the year, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) voted to maintain status quo following the rate cut at its previous meeting retaining the:
- Monetary Policy Rate (MPR) at 13.5%;
- Asymmetric corridor around the MPR at +200/-500bps;
- Cash Reserves Ratio (CRR) at 22.5%; and
- Liquidity Ration (LR) at 30.0%
The Committee considered developments in the global and domestic economy since its last meeting including (1) sustained global growth momentum, and (2) Dovish global central banks in the US and UK. Meanwhile, concerns were hinged on the renewed US-China trade tensions.
On the domestic front, the Committee noted (1) uptick in headline inflation rate in April at 11.37% y/y, (2) stable crude oil prices & production, (3) FX stability amid strong external reserves, and (4) sustained GDP growth of 2.01% in Q1-19.
The MPC acknowledged the continued fragility of the domestic economy, thus reiterating the urgent need for reforms and fiscal stimulus. The MPC members were faced with the choices of maintaining status quo, tightening, or easing monetary policy.
Amid strong arguments for the three positions, the choice of seeking further clarity on the evolution of major macroeconomic fundamentals culminated into a HOLD decision (9 votes vs. 2 for a 25bps rate cut) across holding policy rate. The Committee’s decision came in line with consensus, as shown by a Bloomberg-compiled median estimate of 13.5% for the MPR.