The Central Bank of Nigeria (CBN) on Tuesday retained its benchmark interest rate at 11.5 percent after the two-day Monetary Policy Committee (MPC) meeting in Abuja due to slow economic recovery. Analysts in the financial services sector had expected a hold following persistent uptick in inflation rate and weak growth. Nigeria’s inflation declined to 18.12 percent in April 2021 from 18.17 percent in March 2021, according to data from the National Bureau of Statistics (NBS).
Real GDP grew by 0.51 percent in the first quarter of 2021 from 0.11 per cent in Q4 2020, according to data from the National Bureau of Statistics (NBS). In the fourth quarter of 2020, Nigerian economy sluggishly recovered from recession it slipped into in the second quarter (Q2) 2020 – after output contracted for the second consecutive quarters.
By vote of 10 members of the committee the CBN also retained the Cash Reserve Ratio (CRR) at 27.5 percent, Liquidity Ratio at 30 percent as well as the Asymmetric Corridor around the MPR at +100/-700 basis points. Razia Khan, managing director, Chief Economist, Africa and Middle East Global Research, Standard Chartered Bank, had said, “Still-high inflation and what could emerge as tentative Fx market reforms will likely keep the CBN on hold at the May meeting.”
Given the fact that the rise in inflation has been due to cost-push factors rather than demand pull factors, Godwin Emefiele, governor of the CBN said the Monetary Policy Committee has placed greater weight on utilising tools that would strengthen the nation’s productive base as a nation.