The Central Bank of Nigeria (CBN) on Tuesday left its benchmark interest rate unchanged at 26.5 per cent, opting to sustain its tight monetary policy as inflationary risks continue to weigh on the economy.
The decision was reached at the end of the Bank’s 306th Monetary Policy Committee (MPC) meeting held in Abuja and announced by the CBN Governor, Olayemi Cardoso.
It is the second consecutive MPC meeting at which the committee has maintained the Monetary Policy Rate (MPR) at 26.5 per cent after reducing it by 50 basis points from 27 per cent earlier in the year.
Addressing journalists after the meeting, Cardoso said the committee resolved to hold rates after reviewing recent economic indicators and assessing both domestic and global developments.
He explained that while inflation showed signs of easing in June, global uncertainties, particularly renewed geopolitical tensions in the Middle East, pose fresh risks to price stability.
According to him, the committee considered it necessary to maintain its cautious stance in order to preserve the gains already recorded in curbing inflation.
In addition to retaining the MPR, the MPC narrowed the standing facilities corridor around the policy rate to +50/-450 basis points. The adjustment is expected to encourage banks to channel more funds into lending rather than keeping excess liquidity with the apex bank.
The committee also retained the Cash Reserve Ratio (CRR) for commercial banks at 45 per cent, left the CRR for merchant banks unchanged at 16 per cent and maintained the 75 per cent reserve requirement on non-Treasury Single Account (TSA) public sector deposits.
The latest decision comes against the backdrop of a slight decline in Nigeria’s inflation rate. Data released by the National Bureau of Statistics (NBS) showed headline inflation eased marginally to 15.91 per cent in June, compared to 15.93 per cent in May.
Despite the moderation, the CBN believes inflationary pressures remain elevated, especially as renewed conflict in the Middle East continues to threaten global energy supplies and could push up the cost of crude oil and imported goods.
The committee’s decision suggests that the apex bank is prioritising price stability over aggressive monetary easing, choosing to keep borrowing costs high while monitoring the impact of domestic economic reforms and developments in the global economy.
