The Central Bank of Nigeria has held its benchmark lending rate at 11.5 per cent due to fears of the impact of any increase in the rate on the country’s economic growth trajectory.
The CBN Governor, Godwin Emefiele, announced the decision on Tuesday at the first Monetary Policy Committee meeting of 2022 held in Abuja.
The Central Bank of Nigeria had reduced the rates from 12.5 per cent to 11.5 per cent in September 2020 due to the Covid-19 induced recession.
The CBN is faced with rising inflationary pressures particularly as it relates to food prices.
Emefiele acknowledged the threat of rising inflation at 15.63 per cent from 15.4 per cent in November.
The United States Federal Reserve is expected to decide the path for its tightening of monetary policy to control rising inflation in the US.
But Emefiele said inflation in Nigeria will abate as food supplies, which is a major component of the inflation, will improve.
He said the MPC believes the current policy on growth would be retained as any increase in the benchmark rate would threaten the economy.
Emefiele said loosening will trigger foreign exchange pressure and lead to forex depreciation.
He added that tightening will negatively affect the growth plans of the monetary policy authorities.
According to the apex bank boss, the recovery of most economies globally may be threatened due to Covid-19 pandemic resurgence.
Based on these considerations, Emefiele said the MPC retained the Monetary Policy Rate at 11.5 per cent; asymmetric corridor at +100/–700 basis points around the MPR; Cash Reserve Ratio at 27.5 per cent; and Liquidity Ratio at 30.0 per cent.