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Nigeria Monetary Policy September 2021

Nigeria: Central Bank stays put in September

At its 16–17 September meeting, the Monetary Policy Committee of the Central Bank of Nigeria decided to leave all policy parameters unchanged, keeping the monetary policy rate at 11.50%, the asymmetric corridor at plus 100 and minus 700 basis points around the monetary policy rate, the cash reserve ratio at 27.50%, and the liquidity ratio at 30.00%.

In deliberating its decision, the Committee noted that inflation has continued to decline, and the economic recovery has seemingly gained traction in the second and third quarters. It stated that a rate hike would weigh on private-sector credit growth, and thus hinder the recovery. On the other hand, an easing of financial conditions could derail the downward path of inflation and exacerbate capital outflows amid more negative real interest rates. All in all, the Committee decided that there was no room to either tighten or loosen the Bank’s stance.

The Bank gave no explicit forward guidance on rate movements in its accompanying statement, but noted that “a hold stance will enable the continued permeation of current policy measures in supporting the recorded growth recovery and macroeconomic stability”. As such, the majority of panelists see the Bank holding the rate at 11.50% until year-end, although some pencil in a hike, before the beginning of a tightening path next year.

The next monetary policy meeting is scheduled for 22–23 November.

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