Nigeria: Central Bank of Nigeria retains key policy rate, signals FX flexibility
May 24, 2016
At its 23–24 May monetary policy meeting, the members of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) decided to maintain the monetary policy rate at 12.00%. The Committee also left the asymmetric corridor of plus 200 and minus 500 basis points around the key rate unchanged. Finally, CBN members decided to keep the Cash Reserve Requirement (CRR) at 22.50% and the Liquidity Ratio (LR) at 30.0%.
More importantly, the Board unanimously announced the adoption of “greater flexibility” in its foreign exchange policy with the aim of achieving more market-determined rates and making hard currency more accessible. That said, the Bank stated that details of the operation would be released at a later date.
The Central Bank took the decision on the back of severe energy shortages, spiraling inflationary pressures and scarcity of foreign exchange. Still-low oil prices and, in particular, weaker output due to attacks on oil facilities are aggravating the situation. Moreover, the Bank acknowledged that the prolonged budget impasse delayed much-needed complementary fiscal stimulus.
Regarding the evolution of consumer prices, the MPC stated that rising inflationary pressures continue to reflect the scarcity of refined petroleum products, exchange rate pass through from imported goods, the high cost of electricity and a reduction in food output, among other factors. The next monetary policy meeting is scheduled for 19–20 September.