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Nigeria Monetary Policy November 2020

Nigeria: Central Bank stays put in November

At its 23–24 November meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria unanimously decided to maintain the monetary policy rate unchanged at 11.50%, in line with market expectations and on the heels of the second cut this year delivered at the previous September meeting. In addition, the Bank left the rest of policy parameters unchanged, with the asymmetric corridor remaining at plus 100 and minus 700 basis points around the monetary policy rate, the liquidity ratio at 30.00% and the cash reserve ratio at 27.50%.

Striking a balance between rising inflationary pressures and continuing to support the economy as it emerges from the Covid-19 blow underpinned the MPC’s decision. The economy slipped into recession in Q3, with GDP contracting again, yet at a softer pace than in Q2 as oil output declined to its lowest since 2016 amid compliance with the OPEC+ cut agreement. Despite the downturn, the Bank expects output to recover in Q4. Meanwhile, the MPC remained concerned about inflation, which has been rising steadily over the past few months—hitting a near three-year high of 14.2% in October—as pandemic-induced supply disruptions and structural factors such as inadequate infrastructure and power supply have fed through to price growth. That said, the Bank assessed that price pressures should abate going forward as domestic production recovers and the harvest season sets in, moderating food inflation in turn.

Looking ahead, the communiqué struck a relatively neutral tone in its forward guidance. The decision to stay put, however, enables previous cuts to permeate through the economy and will provide the Bank room to further assess their impact.

The next monetary policy meeting is scheduled for January 2021.

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