Nigeria Monetary Policy March 2022


Nigeria: Central Bank stays put in March

March 21, 2022

At its 21 March meeting, the Monetary Policy Committee of the Central Bank of Nigeria (CBN) stood pat and left all policy parameters unchanged. Consequently, the monetary policy rate (MPR) remained at 11.50%, while the asymmetric corridor was stable at plus 100 and minus 700 basis points around the MPR. In addition, the cash reserve ratio and liquidity ratio were unchanged at 27.50% and 30.00%, respectively. The decision was, however, split: Four out of the ten members in attendance voted to hike the MPR.

In deliberating its decision, the Bank stated that, “inflation was confronted with upward pressure due to emerging risks” both domestically and externally. This was a move away from its prior meetings, where the Bank noted a downward path for inflation. Specifically, the Bank highlighted supply-side factors like a shortage of Premium Motor Spirits, persistent insecurity and the fallout from the Russia-Ukraine war as upside risks to the inflation outlook. Regarding the economy, the Bank noted that growth continued to improve, although it remained fragile. As such, the Bank ruled out an interest rate hike in light of the potentially suffocating impact of the war in Ukraine on the Nigerian economy. Moreover, the Bank also assessed that a tightening of financial conditions at home would not bring about the desired drop in inflation.

The CBN seemingly turned more hawkish in light of global geopolitical circumstances and their impacts on inflation vis-à-vis economic growth in Nigeria. The policy makers stated that a loosening of the monetary policy stance would only serve to fuel inflation, partly through triggering foreign-exchange depreciation. As such, “the Committee decided to adopt a hold stance as it would indicate a precautionary and consistent policy stance with the prevailing economic conditions particularly as further economic and financial shocks are exerted from the ongoing Russia-Ukraine war.” FocusEconomics Consensus Forecast panelists expect the Bank to tighten financial conditions going forward to rein in inflation.

Analysts at the EIU are among those expecting rate increases this year:

“Because the economy is now in better shape, and given the inflation backdrop, it is highly probable that all five external members of the MPC will vote to raise rates at the next meeting, in May. As the inflation data begin to reflect the reality on the ground, our assumption is that the MPC will tilt towards a hike. What will probably be in contention at the next MPC meeting is not whether to raise the benchmark rate but by how much. […] We expect the May meeting to result in an interest-rate hike of 50 basis points, and we forecast a cumulative rise of 100 basis points in 2022 overall.”

The next meeting is scheduled for 24 May.

FocusEconomics Consensus Forecast panelists project the monetary policy rate to end 2022 at 12.14%. In 2023, the panel sees the monetary policy rate ending the year at 12.79%.

Author:, Economist

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Nigeria Monetary Policy Chart

Nigeria Monetary Policy March 2022

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

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