Nigeria Monetary Policy March 2016


Nigeria: Central Bank of Nigeria hikes rates to counter rising inflation

March 22, 2016

At its 21–22 March monetary policy meeting, the members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) surprised market analysts when they decided to hike the monetary policy rate by 100 basis points to 12.00%. Moreover, the Committee narrowed the asymmetric corridor around the key rate from “plus 200/minus 700 basis points to plus 200/minus 500 basis points”. Finally, CBN members decided to raise the Cash Reserve Requirement (CRR) by 250 basis points to 22.50%, while the Liquidity Ratio (LR) was kept at 30.0%.

The Central Bank argued that it took the decision to tighten the monetary policy stance because of rising inflationary pressures on both food and core prices. The Bank cited scarcity of refined petroleum, exchange rate pass through from imported goods, seasonal factors and an increase in administered prices for electricity as the main factors behind the recent surge in inflation.

Regarding the state of the economy, the CBN noted that foreign exchange shortages, fuel scarcity and fiscal uncertainties were hampering growth. In this regard, the Bank urged speedy passage of the 2016 Budget in an attempt to bolster business confidence and reinvigorate the financial markets. The next monetary policy meeting is scheduled for 24 May.

FocusEconomics Consensus Forecast panelists expect the monetary policy rate to end this year at 11.55%. Next year, the panel sees the monetary policy rate declining slightly to 11.60%.

Author: Ricard Torné, Lead Economist

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Nigeria Monetary Policy Chart

Nigeria Monetary Policy March 2016

Note: Monetary policy rate in %.
Source: Central Bank of Nigeria.

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