CBN maintains status quo with MPR

The Monetary Policy Committee (MPC) of the  Central Bank of Nigeria (CBN) today left the Monetary Policy Rate at 14% and other parameters unchanged.

MPR was thus left at 14%, Cash Reserve Ratio CRR at 22.5% and Liquidity Ratio at 30%.  The asymmetric corridor for the MPR was also left at +200/-500 basis points.

CBN Governor Godwin Emefiele also shed more light on the revocation of Skye Bank’s licence and the ‘fine’ levelled on MTN.

The Monetary Policy Rate (MPR) is the rate at which the CBN lends to commercial banks. This, in turn, provides a benchmark at which the banks lend to the public.  The Cash Reserve Ratio (CRR) is the proportion of a bank’s deposits it has to hold as deposits either in cash or with the CBN.

Liquidity ratio is the ratio of a bank’s liquid assets to its liabilities. In other words, a bank’s cash balance plus assets that it can easily convert to cash to the total liabilities owed by the bank, which is typically deposits.

Why the rates were left unchanged

The CBN Governor stated that Holding would sustain gradual improvement in output (GDP)growth. There was also a need to maintain the current policy (interest rate and other parameters) stance in order to get a clearer understanding of the quantum and timing of the planned monetary injections before deciding on possible adjustments.  

The tide may be turning

Emefiele, however, stated that three of the members pushed for an increase in the Cash Reserve Ratio (CRR) by 150 basis points, an indication that left to them they would tighten (increase interest rates). Three members pushed for an increase of the MPR  by 25 basis points.